Hong Kong: Country Outlook

ECONOMIC GROWTH: Data for the second quarter of 2004 showed a significant quickening in the pace of economic growth in Hong Kong. The year-on-year growth rate of 12.1%, up from a revised 7% in the first quarter, was flattered by comparison with the second quarter of 2003, when the crisis occasioned by the local outbreak of Severe Acute Respiratory Syndrome (SARS) was at its height. However, seasonally adjusted quarter-on-quarter data show an expansion of 2.6% in the second quarter of 2004, up from 1.6% in January-March. The momentum of growth is expected to slow in the second half of the year, reflecting high global oil prices, rising interest rates and the measures taken by the Chinese government to slow the mainland economy. Even so, we have revised up our forecast for GDP growth in 2004 to 7.4%, from 6.5% in our last report. We continue to forecast GDP growth of 4.7% in 2005 in line with more moderate world trade growth and slowing economic growth in both the US and China.…