ECONOMIC OUTLOOK:

The Hong Kong Economy:

Currency: Hong Kong Dollar (HKD)

Population: 6.76 millions (End-2001)

ECONOMIC DATA
Time (t)	Real GDP Growth (GDP) (%)	Unemployment Rate (U) (%)	Inflation Rate (p) (%)
1998	-5.3	4.7	2.8
1999	3.0	6.2	-4.0
2000	10.5	4.9	-3.8
2001	0.1	5.1	-1.6
2001Q1+	2.2	4.5	-2.0
Q2+	0.8	4.5	-1.3
Q3+	-0.4	5.3	-1.2 (Sept)
Q4+	-1.6	6.1	-3.6 (Dec)
2002Q1+	-	7.0	-2.3 (Feb)
Per Capita GDP		HK$187,748 (2001)
Industrial Production		-0.1% (2001Q1+)
Retail Sales (in Volume)		1.2% (2001)
Exports Imports		-12.2% / HK$106.6bn (Jan/2002+) -8.6% / HK$109.8bn (Jan/2002+)
Foreign Exchange Reserve		US$111.2bn (Nov/2001) ¡V 4th
Tax Rate (2001/02) -		Corporation: 16% Property: 15% Salaries: 15% (Standard)

p = Composite Consumer Price Index (CPI)

+ Compared with the same month/quarter a year earlier

Interest Rates (i) 2001
Month	DW (%)	P (%)	S (%)
Beginning	8	9.5	-
Jan/2001 Jan	7.5 7	9 8.5	- -
Mar	6.5	8	-
Apr	6	7.5	-
May	5.5	7	-
Jun	5.25	6.75	-
Aug	5	6.5	-
Sept	4.5	6 (19/Sept)	-
Oct	4	5.5 (4/Oct)	0.5-0.75
Nov	3.5	5.25 (8/Nov)	0.25-0.5
Dec	3.25 (11/Dec)	5.125 (12/Dec)	0.125-0.5

DW = Discount Window; P = Prime Lending Rate; S = Savings Rate

Economic and Business Outlook 2002:

Overall Economy:

l The Hong Kong economy will not fully recover before 2004 (unless expansionary fiscal policy and depreciation of the Hong Kong dollar are imposed). (Mike Ng, 2001)

l The original trend seemed that the unemployment rate would fall back to the natural rate of unemployment (Un), i.e. the full-employment level, at the end of 2003 or in the early 2004. However, the tremendous slow-down of the economy in 2001 has delayed the time of full recovery until the middle of 2004. (Mike Ng, 2001)

l At least in the short run, the Hong Kong government should use fiscal policy (and maybe depreciate the Hong Kong dollar to stimulate its exports) in a large extent in order to stimulate the economy back to the full-employment level. Governments' budget deficits are right and proper during a downturn whereas budget cuts can wait until the economy perks up. For the long-run growth, the government should invest in human capital, particularly higher education and in some high-tech industries, as well as providing more favourable business or investment environments.

l As a small open economy, Hong Kong has followed the US to cut interest rates 11 times since January 2001. Hopefully, this will make a big impact on aggregate consumption and investment as the economy is seriously slowing down.

l The savings rate dropped to a 30-year low in September 2001 after Hong Kong had followed the US to cut interest rates for its 8th time.

l Personal bankruptcies are set to rise to a new record in Hong Kong as economic difficulties begin to take hold. The Official Receiver said that 9,705 petitions had been filed in the first nine months of 2001, and that the total for the year would clearly exceed 10,000. Personal bankruptcies in Hong Kong have surged since the Asian financial crisis. In 1998, the number of personal bankruptcies stood at just 1,362. This number rose to 3,876 in 1999 and 5,487 last year. The Hong Kong economy is expected to post negative growth for the year as a whole. Hong Kong is in its 3rd year of deflation and consumer prices have fallen for 36 months in a row. And unemployment is at an 18-month high of 5.5%. Many people have also been forced to take pay-cuts and have seen property values sink due to negative equity.

Population Growth:

l The provisional figure for the end-2001 population of Hong Kong was 6,759,500, according to statistics released by the Census and Statistics Department. There was an increase of 48 000 persons as compared with the end-2000 population, representing a growth rate of 0.7%.

Sources: BBC; Hong Kong Census and Statistics Department; Hong Kong SAR Government Information Centre; Inland Revenue Department; TVB News