HONG KONG: GOVERNMENT ANNOUNCE A 5 PERCENT DROP IN GDP

Описание: (28 Aug 1998) Cant/Eng/Nat

Hong Kong has fallen into full-blown recession, with its once-booming economy shrinking by 5 percent in the second quarter, the government has announced.

Massive government spending sent transactions climbing to a new record of 10.2 billion (b) U-S dollars, while the Hang Seng Index closed down 1.2 percent despite heavy buying by the government.

Hong Kong now joins Malaysia, South Korea, Japan and Indonesia in recession - all countries which have been jolted by the year-old Asian currency crisis.

After a decade of steady growth, Hong Kong now faces its worst recession in 13 years.

On Friday, the government announced a five percent drop in second quarter gross domestic product, or G-D-P.

Two consecutive quarters of shrinking G-D-P signals a recession.

Finance Secretary Donald Tsang forecast the economy's G-D-P rate will shrink by four percent for the year, but said the government has no plans to cut spending.

SOUNDBITE: (English)
"My up to date forecast for G-D-P for 1998 as a whole is a negative four per cent, that there will be a fall of four per cent on our economic performance for 1998 as a whole, as compared with an increase of 9.3 percent rise last year. So there has been a quite an enormous drop for this year, reflecting largely the slowdown in economic activities and external factors following the financial crisis in the region as a whole."
SUPER CAPTION: Donald Tsang, Hong Kong Financial Secretary

Hong Kong has also seen unemployment rise to a 15-year high of 4.8 percent and property values fall by up to 40 percent.

Tsang said Hong Kong will inevitably be affected along with the rest of the global economy by events in Russia and Japan.

SOUNDBITE: (Cantonese)
"Obviously, we must rely on external factors, for example the Japanese yen and the U- S dollar's exchange rate, and whether it will strengthen and stabilize. And another addition, the Russian economy and the rouble would have an impact and affect global stock markets. Hong Kong will inevitably be affected, it is impossible for us to be the last ones standing."
SUPER CAPTION: Donald Tsang, Hong Kong Financial Secretary

Hong Kong Chief Executive Tung Chee Hwa expressed confidence that the territory could weather the financial storm.

He defended the government's intervention into the stock market, saying it was essential to buoy interest rates and the currency.

SOUNDBITE: (English)
"Our adjustment process is painful but is necessary and I know we in Hong Kong can take the pain. What we need is a period of stable interest rate environment to continue our orderly adjustment and to ensure the recovery of our economy as soon as possible. The speculative activities against the Hong Kong dollar and the stock in futures markets has kept our interest rate high and also unstable. This will make the orderly adjustment very difficult. The Asian financial turmoil which indeed has become increasingly global has given us an additional degree of instability."
SUPER CAPTION: Tung Chee Hwa, Hong Kong Chief Executive

Unemployment is predicted to rise further, according to economic advisers like George Leung with the Hong Kong Bank.

SOUNDBITE: (English)
"Well you may expect somewhat further rise in unemployment rate and also more bad news for the hotel business, maybe more lay offs and showing very poor consumption figures, that sort of thing will all possibly come up in the coming quarters."
SUPER CAPTION: George Leung, Hong Kong Bank Economic Adviser


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