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Economic Positioning

Economic Performance

4.     In August 2003, when I took up the office of Financial Secretary, Hong Kong was beset with severe challenges.  After being successively hit by the Asian financial turmoil and the outbreak of SARS, the economy had dipped sharply.  At that time, consumer and investor sentiments were very depressed; deflation persisted: since 1998 the Composite Consumer Price Index (CCPI) had fallen by 16 per cent and the Gross Domestic Product (GDP) deflator had declined by the even greater extent of 23 per cent; and our fiscal deficit was worsening from year to year.  At such a crucial moment, the responsibility of being Financial Secretary weighed heavily on me. Although we were confronted with such adversity, I remained fully confident that, with the resilience, ingenuity and tenacity of Hong Kong people, we would surely ride out the storm together, and see our economy emerging again stronger than ever.

5.        The spirit of Hong Kong prevailed, and with the full support of our nation, our economy has gradually come out from the doldrums and staged a strong recovery, standing out in stark contrast to 2003.  The number of negative equity cases had fallen from the peak of over 100 000 to 8 400 by the end of 2006, in tandem with a significant recovery in the property market.  Total visitor arrivals had also risen from some 15 million three years ago to more than 25 million in 2006, an increase in excess of 60 per cent.  As at mid-February, our stock marketî–¸ total capitalisation had increased by 300 per cent over its 2003 trough.  Along with the strong recovery of our economy, the deflation that had persisted for years also ended in mid-2004.  

6.        GDP leapt by 6.8 per cent in 2006.  Our economy has continuously enjoyed above-trend growth over the past three years, registering an average annual increase of 7.6 per cent.  Furthermore, our economic growth has become more and more broad-based.  As for consumption, total retail sales for 2006 registered an increase of 23 per cent over those of three years ago.  And overall investment has been accelerating for four years in a row.  It grew 8 per cent last year, the biggest rise since 2000.

Chart 1 - Gross Domestic Product

7.        There have been extensive improvements in the labour market.  Total employment has hit successive new highs over the past three years, with the latest figure close to the 3.5 million mark, up by more than 310 000 over its low point in 2003.  The unemployment rate has fallen from its peak of 8.5 per cent in mid-2003 to a six-year low of 4.4 per cent.  The number of long-term unemployed has also fallen by over half from its 2003 level.  As at the end of January this year, the amount of unemployed Comprehensive Social Security Assistance (CSSA) cases was 14 000 less than the high of 51 400 in 2003.

Chart 2 - Total Employment

8.       Upon taking up this office in 2003, in order to address the serious deficit problem and to restore the health of our public finances, I set the following three fiscal targets:  

l    reduce operating expenditure to $200 billion;  
l   restore fiscal balance in the Operating and Consolidated Accounts; and  
l   bring public expenditure down to 20 per cent of GDP or below.

Due to the combined efforts of the Government and the entire community, we achieved all these targets in 2005?6, three years ahead of schedule.


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2006 | Important notices
Last revision date : 28 February, 2007