Hong Kong's economy on course for 3pc growth rate

Hong Kong's economy will grow almost as fast at the beginning of this year as it did in the third quarter of last year, expanding at nearly 3 per cent, according to a quarterly forecast by the University of Hong Kong.

Growing export demand and a surge in mainland visitors boosted the economy's growth in the final quarter of 2002 and will continue to do so for the first quarter of 2003 to almost match the third quarter's 3.3 per cent growth, the Better Hong Kong Foundation, which commissioned the report, said yesterday.

The economy started to pick up steam in the second half of last year after shrinking for most of the 12 months before that.

Richard Wong Yue-chim, director of the university's Asia-Pacific Economic Co-operation Study Centre, said the economy will see 'moderate growth, not rapid growth'.

'This is to a large extent because the world economy is not growing robustly yet,' he added.

Hong Kong depends on global export demand, Mr Wong said.

The forecast predicts the economy will grow 2.7 per cent in the final quarter of last year over the same period the year before, with growth speeding up slightly to 2.9 per cent from January to March this year. The government will release fourth-quarter GDP figures for 2002 in March.

Deflation will persist this year, the researchers said. The composite consumer price index, which measures prices for a basket of goods and services, will probably fall 3 per cent in the first quarter. Hong Kong has been hit by falling prices for 49 months as property prices drop and retailers introduce discounts.

The unemployment rate, which fell to 7.1 per cent in November, will probably edge down to 7 per cent.

'The recovery has generated new jobs, but not enough to cause a rapid drop in unemployment,' Mr Wong said.

Exports will continue to boom, with re-exports, which make up most of Hong Kong's shipments, growing 15 per cent in the first quarter over a year ago. Exports of services in industries such as tourism, trade and banking will also help, growing 5.8 per cent in the first quarter, the report said.

While the report did not give a full-year forecast, Allan Siu Kai-fat, executive director of the Apec Study Centre, said the economy would probably expand 2 to 3 per cent in 2003 if there was no drawn-out war between the United States and Iraq.

If a prolonged war does happen, growth forecasts will have to be slashed because of disruption of the global oil market.

Graphic: MARC14GET