Policy Address

3.         Hong Kong was hit hard by the financial tsunami — our economy recorded a sharp year-on-year decline of 7.8% in the first quarter of this year. The pace of deterioration and the depth of the decline in external trade earlier this year were unprecedented in decades. As the economic downturn in the US began to slow, the Asian economies started to improve. In particular, the Mainland economy quickly regained its growth momentum in the second quarter after forceful stimulus measures by the Mainland authorities. Hong Kong's economy also benefited. Our economy grew by 3.3% in the second quarter as compared with the first quarter, reversing the contraction over the preceding four quarters. I am confident that, for the rest of the year, our economy will improve further and gradually recover.

4.         Faced with the worst global recession in decades, the Government spared no effort in “stabilising the financial system, supporting enterprises and preserving employment” in the shortest possible time. The Hong Kong Monetary Authority introduced a full deposit protection scheme. As a result, interbank rates fell significantly. The loan guarantee schemes launched by the Government last year stabilised over 10 000 enterprises and secured more than 240 000 jobs. The Government's relief measures since last year have amounted to $87.6 billion — equivalent to 5.2% of our Gross Domestic Product (GDP), higher than the average for the G-20 economies. The stimulus packages taken together, which would raise this year's GDP by roughly two percentage points, have abated the rise in unemployment. These measures have stabilised the local economy without impairing the Government's fiscal position in the long term. The Mainland and Asian economies have been improving at a pace faster than those in Europe and the US. Hong Kong as an Asian business hub has attracted an influx of foreign capital, boosting our real estate and securities markets.

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