|Global and Regional Economic Environment
Regarding the global and regional economic environment, the sub-prime mortgage problem and the credit crunch triggered by the US housing market correction has resulted in a noticeable slowdown in the US economy and created global financial turbulence. The impact of the sub-prime mortgage problem on financial institutions and investors, the losses resulting from it, and the negative effect it is having on the global economy all have yet to fully surface.
The present credit crisis impacts mainly on the US and Europe. Its direct impact on Hong Kong and Asia has so far been limited. Overall though, the economic performance of Asia and other emerging markets remains strong. These economies have become major pillars of global economic growth. The robust economic growth in the Mainland and in India is especially noteworthy.
However, the risk of overheating has emerged in the Mainland economy. Our nation has to step up macroeconomic adjustment and adopt a tight monetary policy as well as other measures to curb inflation and raise economic efficiency. In the short term, such measures will have a bearing on Hong
Kong's economy as well as a direct impact on many investors.
The global trend of rising inflation deserves our attention. Apart from surging food prices, energy and commodity prices remain persistently high. As food supply in the world market will take some time to increase, it is likely that there will still be upward pressure on the prices of foodstuffs in the short term.
Taking all these factors into consideration, Hong Kong is now faced with the risk of global economic slowdown coupled with rising inflation. There are also rising protectionist sentiments. We should be aware of the possibility that the situation might deteriorate in the near future and that the fallout may be prolonged.