HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
On the fiscal side, the Budget reverted to a small surplus of $15.1 bn or 1.3% of GDP in the financial year of 1996/97 ($3.1 bn deficit in 1995/96). Continued fiscal discipline has restrained domestic demand and helped alleviate inflationary pressure.
EXPORT AND IMPORT GROWTH SLOWED
Export performance was generally weak in 1996, with total export growth slowing to 4.8%, from 12% in the previous year. Of the total, domestic exports fell by 8.4%, while re-exports increased more slowly by 7.5%. This was the result of continued relocation of Hong Kong's manufacturing base to China and increasing competition from other developing economies.
Along with the rise of the US dollar, the Hong Kong dollar has in general strengthened against major non-US dollar currencies since mid-1995. During the year, the effective exchange rate index of the Hong Kong dollar rose by more than 2% (Chart 3).
In 1996, import growth also decelerated. While partly reflecting the slow-down in re-exports, the weak import growth was also due to a continued across-the-board decline of retained imports, which was in line with the less rapid build-up of stocks.
As a result of slower import growth, the merchandise trade deficit narrowed to $138 bn (9% of total imports) in 1996 (10% in 1995).While the deficit of domestic exports versus retained imports fell to $333 bn, the surplus of re-exports versus imports for re-exports rose to $196 bn.
Exports of services grew by 6% in 1996, with continued expansion in offshore trading and purchasing services, exports of financial and other professional and business services as well as tourism-related earnings. Invisible trade registered a surplus of $130 bn, slightly less than the visible trade deficit, resulting in a small deficit of $8 bn in the overall trade account.
LABOUR MARKET IMPROVED
The job market improved in 1996, with the unemployment rate declining steadily during the year, from 3.2% in the March quarter to 2.6% in the December quarter. Total employment rose by 3.5% in 1996, faster than the labour supply growth of 3.1%. Reflecting more buoyant activities, marked increases in employment were recorded in construction by 19.9%, wholesale, retail and import/export trades, restaurants and hotels by 8.8% as well as financing, insurance, real estate and business services by 4.9%.