1Hong Kong SAR GovernmentHong Kong SAR Government
2008 2008 HalfHalf--yearly Economic Report 2008yearly Economic Report 2008
&&2008 2008
Updated economic forecasts for 2008Updated economic forecasts for 2008
15 15 August 2008August 2008
22008Economic performance in 2008 Q2
3-6
-4
-2
0
2
4
6
8
10
12
14
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
10-year trend growth
(1998-2007)
4.2%3.8%
(%)Year-on-year rate of change in real terms (%)
Economy grew moderately in 2008 Q2
42008Salient features of Q2 performance
Economy grew moderately, as the adversities in the external environment put a drag on the growth of the Asian region
Exports of goods and services as well as consumption spending expanded at a slower pace; business confidence stayed positive
Labour market conditions held firm
Inflation went up further
50
1
2
3
4
5
6
7
0
2
4
6
8
10
12
14
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Japan EU US Mainland( RHS)
(%)Year-on-year rate of change in real terms (%)
Global economic growth slowing down
6-10
-5
0
5
10
15
20
25
30
35
40
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Exports of services
Exports of goods
7.1%4.4%
(%)Year-on-year rate of change in real terms (%)
Exports of goods and services facing a challenging external environment
7-10
-5
0
5
10
15
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Private consumption expenditure
2.3%
(%)Year-on-year rate of change in real terms (%)
Consumer demand moderated in growth
3.1%
10-year trend growth
(1998-2007)
8-20
-10
0
10
20
30
40
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
(%)Year-on-year rate of change in real terms (%)
Machinery, equipment and
computer software
Gross domestic fixed capital formation
Building and construction
Total investment spending expanded further
6.5%
-1.7%
4.3%
90
2
4
6
8
10
12
Q11998
Q11999
Q12000
Q12001
Q12002
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
(%)Unemployment rate (%)
Lower-skilled workers
Professional andmanagerial staff
Unemployment rate remained at the lowest in the past decade
Overall
3.8%3.3%
1.3%
10
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Payroll per person engaged
Earnings on the rise
3.1%
5.7%
(%)Year-on-year rate of change (%)
Composite consumerprice index (CCPI)
11
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Q12003
Q12004
Q12005
Q12006
Q12007
Q12008
Payroll per person engaged
Earnings on the rise
4.1%3.8%
(%)Four-quarter moving average, year-on-year rate of change (%)
Composite ConsumerPrice Index (CCPI)
12
Inflation went up
20082007
CCPI Inflation by component:
4.6(4.9)
1.31.34.6-3.51.67.23.95.4
17.4
Q1
5.7(5.7)
1.22.55.3-2.31.67.75.96.3
19.2
Q2
Q4
Q3
3.5(3.5)
1.6(2.7) Overall
1.01.3 Other services0.7-0.1 Transport3.42.1Misc. goods-4.0-4.2 Durable goods2.03.7 Clothing and footwear3.4-2.7 Electricity, gas & water4.20.7 Housing3.72.6Meals away from home11.68.2 Foodstuffs
Note: Figures in brackets represent inflation rates after discounting the effects of public housing rental waiver and rates concession.
13
Recent pick-up in inflation mainly due to
global food inflation
3.05.417.439.22008 Q1
1.92.68.216.1Q3
2.11.32.510.52006
2.41.84.413.32007 Q1
2.22.04.16.9Q2
3.76.319.244.8Q2
2.33.711.624.3Q4
Excluding
food
Meals away from home
Food-stuffs
Underlying CCPI
World food prices*
Note: (*) IMF data. : (*)
( Year-on-year rate of increase)
14
Consumer price inflation in Asia
7.5%7.5%Singapore
5.5%4.8%Korea6.1%5.7%Hong Kong
11.4%9.7%Philippines26.8%24.5%Vietnam
11.0%10.1%Indonesia8.9%7.5%Thailand7.7%7.8%India7.7%4.9%Malaysia
7.1%7.8%Mainland
5.0%4.2%Taiwan Jun Q2
2008
15
Outlook for the rest of the year
16
()Global economic growth, particularly in the advanced economies, to moderate further
Financial market turmoil to linger on
Mainland China and other emerging market economies, while being increasingly affected by the global environment, should expand solidly further
2008Outlook for economic growth in 2008
17
Firm labour market conditions, low interest rates and positive business confidence still support further growth in domestic demand
Economic growth likely to be moderate in the rest of 2008, more in line with the trend growth in the past decade
2008 ()Outlook for economic growth in 2008 (Contd)
18
Inflationary pressures around the world still rising
Food and oil prices have recently tended to ease in the international markets and US dollar to rebound. These are favourable developments for inflation, but commodity prices and exchange rate movements can still be volatile in the period ahead
2008Outlook for inflation in 2008
19
The lagged effects of earlier surges in local rentals being increasingly felt
Productivity improvements and the slower pace of economic expansion should help to lower pressures on prices and costs
The relief measures to be implemented in the second half of 2008 will help to lower notably the headline inflation
2008 ()Outlook for inflation in 2008 (Contd)
20
-8
-6
-4
-2
0
2
4
6
8
10
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
GDP
10-year trend growth
(1998-2007)
()(Forecast)
4-5%
(%)Rate of change in real terms (%)
2008Economy poised for a moderate growth in the rest of 2008
3.8%
21
-6
-4
-2
0
2
4
6
8
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Composite CPI
()(Forecast)
5.5%
4.2%
(%)Rate of change (%)
Underlying
Headline
20085.5%Underlying inflation at 5.5% in 2008
22
Latest forecasts for 2008
: 4-5%Forecast GDP growth : 4-5%
: 5.5%Forecast underlying CCPI inflation : 5.5%
: 4.2%Forecast headline CCPI inflation : 4.2%
23
Thank You