The International Monetary Fund (IMF) Staff Mission said on 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 predicts, reflecting a slowing in global growth and some easing of activity on the mainland.
This assessment was made in the mission’s concluding statement on visiting Hong Kong for the annual Article IV Consultation to review macroeconomic policies, including fiscal and exchange rate issues.
Consumer prices, which are expected to remain stable this year, are projected to rise 1 percent next year, said the mission.
They urged the government to take advantage of the current favorable macroeconomic environment to ensure robust and sustainable growth over the medium term and supported their efforts to reduce the structural deficit and ensure a credible and lasting fiscal consolidation.
Noting that fiscal performance has improved markedly, reflecting a strong recovery and implementation of deficit reduction measures, the mission commended the authorities for their expenditure restraint in the current economic upturn, and reiterated 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 the authorities' commitment to eliminate the structural deficit.
"It is essential that they 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 October 26 to November 2 and held discussions with the private sector, government officials and members of civil society, including academics and civil service unions.
Financial Secretary Henry Tang welcomed the IMF mission's assessment on Tuesday.
“We remain strongly committed to restoring fiscal balance by 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.
(Xinhua News Agency November 17, 2004)