REAL GROWTH POWERS AHEAD AT 10.4% IN Q3
External trade and deflation continue to boost outcome
Chamber upgrades annual forecast to 10.3 per cent

Comment by Chamber Chief Economist, Ian K Perkin, on the Third Quarter Economic Report and Gross Domestic Product (GDP) figures issued by the Government today.

The Economics Division of the Chamber has upgraded its full year Gross Domestic Product (GDP) forecast to a real 10.3 per cent for the current year following the release of the better-than-expected GDP outcome for the third quarter today.

This implies growth of around 6 per cent in the final quarter of the year to achieve the new forecast. The Chamber's previous forecast for the year, made back in July, was for 8.8 per cent real growth.

It is now clear that the dramatic increase in external trade, mainly into and out of China, but through Hong Kong, as well as a substantial increase in retained imports in the SAR, has had a bigger than anticipated impact on real growth.

The limited economic numbers so far for the final quarter of this year suggest the economy is remaining on course, but we will know more on Monday when the trade figures for October will be available.

It should not be forgotten, however, that economic growth turned strongly positive in the final quarter of last year, meaning there will be a far higher base of comparison for the final quarter of this year.

Deflation is also easing, albeit moderately, in GDP deflator terms, and this will also have an impact on the calculation of the real growth rate. The final quarter also tends to be a mixed period for external trade out of China and through Hong Kong.

In these circumstances, six per cent growth for the final quarter and therefore 10.3 per cent growth for the full year can be regarded as extremely positive.

If there is anything to be concerned about in today's third quarter figures it is the continuing high levels of deflation and the low nominal (current dollar terms) growth rate. External trade expansion is strong, but the domestic economy remains weak.


For further information contact Ian K Perkin on 2823-1242