*********************************************

Amid encouraging signs of economic recovery, the International Monetary Fund (IMF) projects Hong Kong's real gross domestic product growth at around 4.5% - 5% for 2004 following an estimated growth of 3% for 2003.

IMF said that the strong economic recovery is supported by surging inbound tourist arrivals - foremost from the Mainland - a strengthening global economy, the advent of the Mainland and Hong Kong Closer Economic Partnership Arrangement and the allied improvement in domestic consumer sentiment.

IMF expects an easing of deflationary pressures in the near term. It projects consumer price deflation to ease to 1% by end-2004 and cease to exist by mid-2005.

This assessment was made by the IMF Mission in their Concluding Remarks released at the end of its visit to Hong Kong for an interim review of Hong Kong's macroeconomic policies, including fiscal and exchange rate issues under the annual Article IV Consultation process.

On the fiscal side, the IMF recognises that despite difficult economic conditions, significant progress has been made this year in enacting a number of revenue and expenditure measures. However, IMF felt that the government should leverage on the improvements in macroeconomic prospects to make demonstrable headway towards fiscal consolidation. It recommends a further reduction of the operating deficit by about 1% of GDP in financial year 2004-05. This would provide a credible start to the drive for fiscal consolidation.

Acting Financial Secretary, Mr Frederick Ma said today (December 23), "We welcome the IMF's recognition of the significant effort and progress made by the Government so far towards restoring fiscal balance. We are committed to achieving fiscal balance by 2008-09."

The IMF Mission was in Hong Kong from December 11 to 15. During its visit, it held discussions with private sector financial institutions, commercial corporations and government authorities. The Concluding Remarks can be obtained from the website of the Financial Services and the Treasury Bureau (www.info.gov.hk/fstb/fsb/report/index.htm).

Ends/Tuesday, December 23, 2003

NNNN