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HK GDP Expected to Grow 1 to 3.6 Percent in 2002
Hong Kong's GDP growth rate for 2002 is expected to stand between 1 percent and 3.6 percent, according to economists from major foreign financial institutions.

Standard Chartered Bank have forecast Hong Kong's 2002 GDP growth rate to be 1 percent, while ING Barings have made a more optimistic forecast of 3.6 percent.

Markus Rosgen, ING Barings chief strategist for Asia, said, "As soon as the uncertainties over the global economy disappear, the United States economy will recover. Consumers' savings will be unwounded, leading to a boost in household consumption."

K.C. Kwok, regional chief economist of the Standard Chartered Bank, said the Hong Kong economy will turn around only gradually when external environment improves and economic recovery will be more obvious in the second half of 2002.

Consumer price inflation is expected to stand at negative growth of one percent while unemployment rate will reach 6.4 percent by mid-2002.

"Consumer demand remains weak and deflation is continuing. Also, the unemployment rate is rising and an export turnaround has yet to be seen. But the substantial drop in interest rates have helped many companies and families," Kwok said.

ING Barings chief economist Tim Condon said the key to turnaround of the global economy is a good monetary and fiscal policy in the United States.

On the depreciation of the Japanese yen, Condon said it will not affect Hong Kong as the Hong Kong dollar is pegged to the US dollar. He expected a target price of 130 to 135 Yen to one US dollar this year.

ING Barings said Hong Kong is still expected to experience prolonged deflation until early 2003 and unemployment is also expected to remain at least 5 percent throughout the first six months of 2002.

But companies with more exposure to the Chinese mainland and the rest of the world should perform better than companies merely focusing on Hong Kong.

ING Barings has a "neutral" weighting on Hong Kong, and has set a 12-month index target on the Hang Seng Index of between 13,000 and 13,500 points.

The investment bank also forecasts that the United States Federal Reserve will hike interest rates by 175 basis points, a reversal of all the cuts since September 11, over the course of 2002.

China's reforms on market economy, given new impetus by accession to the WTO, will continue to boost productivity and attract foreign investment, it added.

(China Daily January 10, 2002)

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