HK likely to achieve 7.5 percent economic growth: official

Hong Kong Financial Secretary Henry Tang said Thursday the third quarter economic growth figures will confirm that Hong Kong is on track to reach a 7.5 percent full-year growth rate.

Speaking at the 11th Annual Hong Kong Business Summit Thursday, Tang said Hong Kong's economy has finally turned the corner and is now onto a broad-based recovery, and adding the government might not need additional measures to reach fiscal balance so long as it continues its expenditure restraints.

He said more than 100,000 jobs were created in the past year, and businesses are now complaining about shortages and higher turnovers of some professionals, such as accountants.

"The property market of course turns for the better with much improved sentiments, and the number of mortgages in negative equity has plunged from over 100,000 to 25,000," he added.

The growth of investment in industrial machinery for manufacturing use, having suffered several years of set-back, has been rising very rapidly since early this year, registering 18 percent growth in first quater of 2004, 12 percent in the second quater, and a whopping 33 percent in the third quarter.

Although Tang remains cautiously optimistic about Hong Kong's economy in 2005, he said there are many challenges ahead. They include how to tackle the effects of Hong Kong's economic restructuring and how to maintain Hong Kong's competitiveness.

The city's economic future will continue to be subject to global economic cycles, he stressed.

"The volatility in crude oil prices will continue to be a cause of concern for the global economy next year. The continued weakness in the US dollar, which to some extent should give Hong Kong's exports a helping hand in 2005, would be something we need to continue to watch out for," he said.

On Hong Kong's tax system, Tang said Hong Kong can afford to think about tax reform, particularly in broadening its narrow tax base, when the economy is on upswing.

"That is why I am proposing the option of a goods and services tax for public debate. We are at an early stage of such tax. An internal committee will submit a report to me by end-2004, and I will announce the next step in the March 16 Budget," he said.

"What we need for this society is constructive engagement and rational debates, so that we come to a consensus view about the best way forward, especially how to mitigate the impact of a good and service tax on the less privileged, and achieve the effect of both securing a steady stream of government revenue and prioritizing spending areas to address the challenges of the needy," Tang said.