**************************************
Following is the transcript (English portion) of a media session by the Financial Secretary, Mr Henry Tang on the "Economic Situation in the Third Quarter of 2005" at the lobby of Central Government Offices, West Wing, today (November 25):
Financial Secretary: The third quarter GDP increased by 8.2% in real terms year over year. This a very robust figure and I am pleased to say that the GDP growth is a pretty all-rounded growth covering external trade, export of services, consumption as well as investments. So it is a fairly robust and full recovery.
In view of the robust third quarter growth of 8.2% I have decided to revise the full year growth upwards from the 4.5 - 5.5 range to 7%. A 7% growth for the whole year represents a projected 6.2% growth for the fourth quarter. The reason I am predicting a slower fourth quarter growth is that the higher interest rates, the higher energy costs as well as other external factors will put a dampening effect on the fourth quarter growth. Inflation remains moderate. In the first 10 months of this year inflation stayed at 1% so I have revised the full year inflation projection down from 1.5% to 1.2% for the whole 12 months of 2005. We will remain vigilant of the world economic situation as well as that of our neighbouring economies. We have reasons to be optimistic but we must remain vigilant of external stocks that may dampen our economic situation.
Reporter: The Asian Development Bank is saying that if the avian flu is striking, the region is losing 6.5% that was kind of middle of the road scenario and mostly hit would be Hong Kong and Singapore. What would that mean number wise for Hong Kong if it is coming to that an end?
Financial Secretary: We are of course aware of the fact that avian flu is being detected in many of the neighbouring places around Hong Kong, so we can never overlook or be relaxed about the possibility of avian flu happening in Hong Kong. We have remained vigilant. We have given our chickens the anti-viral shots but we remain alert to the fact that it may happen here. But it is very hard to make an objective estimate on how much effect it will have on our economy because it depends on the degree of seriousness. If it is a very efficient human-to-human transmission, it will have a huge effect on the whole region, and of course Hong Kong will not be an exception. It all depends on what degree of severity avian flu erupts around us or in Hong Kong. So we have made a number of possible scenarios but we don't want to speculate on which scenario is most likely because so far we have not had avian flu in Hong Kong this year.
Reporter: The US interest rate is likely to be high in the future. What would you think that it would affect Hong Kong economy?
Financial Secretary: I don't know when interest rates will peak. Based on the Federal Open Market Committee's minutes of a meeting held three weeks ago, the signals are that the interest rate cycle is nearing its peak, so I believe the stock market reacted in these last two days is because of the FOMC minutes. And I believe, perhaps, the Link REIT's reaction to date is also a reflection of the market sentiment based on those minutes. I should not speculate on how much more it will go up by or what kind of signal the next meeting will send out in December.
Reporter: How ...would upset the Hong Kong economy in the fourth quarter?
Financial Secretary: A lot of it is anticipated. I believe the market widely anticipates that the FOMC meeting will raise interest rates by another 25 basis points. So if it goes up by another 25 basis points it will come as no surprise to the whole market because the market has anticipated it.
Reporter: Giving the economic growth, are there any rooms for personal tax reduction?
Financial Secretary: I certainly have heard the people's voice in these last few weeks of consultation that there is a very strong wish of the people that the Government share the fruits of economic success with the people. I understand the message and I know where they are coming from, but I cannot make that decision today because there are many other external factors that remain uncertain. For example, whether avian flu will happen here or whether there is other external shocks that will dampen our economic situation. I will have to make a decision before I actually write the budget.
Reporter: Would there be any good news.
Financial Secretary: I like good news more than bad news.
(Please also refer to the Chinese portion of the transcript.)
Ends/Friday, November 25, 2005
Issued at HKT 21:52
NNNN
Windows Media format
Real Media format