The Hong Kong dollar peg will face growing pressure if the Sars outbreak is not brought under control quickly, Financial Secretary Antony Leung Kam-chung said yesterday.
Mr Leung's comments were in response to a report by international credit rating agency Moody's Investors Service.
The report said the market was losing confidence in the two-decade-old peg arrangement because of prolonged deflation and the budget deficit.
'If Sars is not resolved soon, obviously it would put a lot of pressure on the economic growth side as well as on the fiscal situation, thereby putting possible pressure on the pegged exchange rate,' Mr Leung said.
However, he said the government had no plans to change the peg system.
Moody's said the economy was going through a 'shock' caused by the Sars outbreak and was expected to grow by only 1 per cent this year.
The deficit, projected at $68 billion for 2003-04, might end up in the $80 billion to $90 billion range, equal to about 6 to 7 per cent of gross domestic product, Moody's said.
