The International Monetary Fund (IMF) Staff Mission said Tuesday that it expects Hong Kong's economy to grow by 7.5 percent this year amid strong domestic demand and exports.

But the growth will moderate to 4 percent next year, it suggests, reflecting a slowing in global growth and some easing ofactivity on the mainland.

This assessment was made by the IMF mission in its concluding statement at the end of a visit to Hong Kong for the annual Article IV Consultation, which involves a review of Hong Kong's macroeconomics policies, including fiscal and exchange rate issues.

Consumer prices, which are expected to remain flat on average over this year, are projected to rise 1 percent next year, said the mission.

The mission urged Hong Kong government to take advantage of thecurrent favorable macroeconomic environment to address Hong Kong'spolicy challenges to ensure robust and sustainable growth over the medium term.

It supported Hong Kong government's efforts to reduce the structural deficit and ensure a credible and lasting fiscal consolidation.

Noting that fiscal performance in Hong Kong has improved markedly, reflecting the strong recovery and implementation of deficit reduction measures, the mission commended the authorities for their expenditure restraint in the current economic upturn, and reiterates its recommendation to broaden the tax base and stabilize revenue through the adoption of a goods and services tax.

Mission leader and Division Chief of the IMF's Asia & Pacific Department Eswar Prasad welcomed Hong Kong authorities' commitmentto eliminate the structural deficit.

"It is essential that the authorities take advantage of the current favorable macroeconomic environment to forcefully address the long-standing structural deficit problem," he said.

The IMF mission was in Hong Kong from Oct. 26 to Nov. 2 for theArticle IV Consultation visit. It held discussions with the private sector, government officials and members of civil society,including academics and civil service unions.

Hong Kong Financial Secretary Henry Tang welcomed Tuesday the IMF mission's assessment of the Hong Kong economy. "We remain strongly committed to restoring fiscal balance by fiscal 2008-09 and to bring public expenditure down to 20 percent of GDP or below in line with our principle of 'market leads, government facilitates'," said Tang.

Source: Xinhua