September 10, 2001

CHAMBER DOWNGRADES GROWTH FORECAST

The Hong Kong General Chamber of Commerce has revised its forecast for average real growth for the whole of 2001 to just 0.7 percent. This is due to the fact that the Chamber believes there will be no real growth in the local economy in the second half of the 2001 calendar year.

This downgrade follows the release of the Government's second quarter economic report on August 31 showing just 0.5 percent growth for the quarter and expected growth of one per cent for the full year. Chamber Director Eden Woon said that the Chamber took the unusual step of giving a second revision of GDP forecast this year because of the rapid downturn of the economy and the large variation between what the Chamber sees today versus what it predicted four months ago.

The Chamber feels that it is increasingly likely that Hong Kong will have to await the New Year, after China enters the WTO, after the beginning of recovery by the US - and after a new Government Budget - before any modest recovery can be expected.

"Given the external factors now affecting the local economy, and apparent weaknesses in both domestic consumption and investment, we believe the Government's forecast of one percent growth for the year might be slightly optimistic," Chamber Chairman, Mr Christopher Cheng said.

According to the Chamber, the continuing weakness in the external trade picture, the setback to retail sales in July, and some scaling back of investment all suggest a weak outlook for the second half.

"Unemployment also appears to be on the rise slightly and that is likely to do little for confidence in the short term," Mr Cheng said.

"Ultimately, lower interest rates will have some impact, but with potential borrowers lacking in confidence and lenders continuing to take a cautious approach, it will take some time for them to give a lift to activity."

"Expectations for a US-led recovery continue to recede well in to 2002, and Europe and Japan are also weak. Of Hong Kong's major trading partners, only China is showing good growth and most of that is domestically-based."

"The Government's own full year forecast anticipates growth of only 0.6 per cent in the final six months of the year, but it is more likely to be zero, or even slightly negative if conditions deteriorate further," Mr Cheng added.

For further information, contact: Dr Eden Woon, Director, 2823-1211