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Economic growth to ease to 5% in 2007

(China Daily HK Edition)
Updated: 2006-11-17 08:54

Hong Kong's economic growth is set to drop next year as slowdowns on the mainland and in the United States hurt exports and some uncertainty in the jobs market upsets consumer confidence, a Reuters quarterly poll shows.

The median forecast of 10 economists was for gross domestic product to grow by 5 per cent in 2007, slowing from an estimated 6 per cent in 2006, 7.3 per cent in 2005 and 8.2 per cent in 2004.

"Next year will be about maintaining growth. It will be a challenge," said Tai Hui, an economist at Standard Chartered Bank. "There's going to be a slowdown in both exports and on the domestic demand side."

The 2006 growth forecast was slightly below the 6.3 per cent projected in a poll in August, but the 2007 prediction was unchanged.

The territory has benefited from the mainland's economic boom, convincing Hong Kong companies and consumers to step up spending and investment.

The stock market is at a record high and wages increased by an average 2.4 per cent this year, the biggest increase since 2002, the Institute of Human Resources Management says. It projects that wages will rise 3 per cent next year.

The jobless rate has tumbled to 4.7 per cent, a five-year low, from a record high 8.6 per cent three years ago and many economists estimate Hong Kong now has close to full employment.

But unemployment is high in the low-skilled sector, where many jobs have shifted to the mainland. That and an expanding labour force could see the jobless rate rise next year, undermining consumer confidence and spending, economists said.

A weaker pace of exports poses the biggest risk to the economy, though.

Export growth so far this year has slowed down from last year's double-digit annual rates and is likely to slow further next year given signs of a slowdown in the US economy and expectations of a less robust momentum on the mainland's sales abroad, economists said.

Hong Kong's trade is predominantly re-exports to and from the mainland. The poll forecast a US$14.4-billion trade deficit in 2006, widening to a US$14.9-billion deficit in 2007.

Hong Kong's inflation will remain tame, the poll shows. The median forecasts projected the composite consumer price index would rise on average by 2.6 per cent in 2007, picking up from a forecast 2.2 per cent increase this year.



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