eToro – Forex Trading Forum

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Furthermore, attention should be paid on developments of Hong Kong's balance of payment and fiscal position. In 2007, Hong Kong's current account registered a surplus of HKD200 billion, with the HKD153.7 billion deficit in merchandise trade more than offset by the HKD330.2 billion surplus in services trade. An overall BOP surplus of HKD114.5 billion was also recorded. Yet should a crisis in Asia cause the current account or BOP surplus to shrink or even turn to deficit, as in 1998 and 2002, the Hong Kong Dollar peg - the foundation of domestic financial stability, may encounter pressure.

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On the other hand, while Hong Kong's fiscal health would not be harmed in the short term, it should be noted that some relief measures are permanent and the Budget has not taken into account the possibility of any serious market turmoil in Asia. High inflation will boost nominal economic activities and favour a rise in government revenue, but it will dent real economic growth. Should inflation exceed real growth, fiscal developments can turn negative.

Facing the above risks which are out of Hong Kong's control, the best to avoid possible shocks is to try to contain inflation, monitor capital flows and make contingency plans.

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Real GDP Growth

(%)


Inflation

(%)


Prime Rate or

Average Lending

Rate(%)




2007


2008Q1


2007


2008

Apr-May




2007


2008

Apr-May



China


11.9


10.6


4.8


7.7


6.93


7.47

South Korea


5.0


5.8


2.5


4.9


6.64


6.91

Taiwan


5.7


6.1


1.8


3.7


6.07


6.32

Singapore


7.8


6.7


2.1


7.5


5.33


5.33

Malaysia


6.3


7.1


2.0


3.0


6.75


6.75

Thailand


4.8


6.0


2.3


7.6


7.03


7.25

Indonesia


6.3


6.3


6.4


10.4


15.77


15.58

Philippines


7.2


5.2


2.8


9.6


8.69


n.a.

India


9.6


8.8


6.4


7.9


12.50


12.25

Vietnam


7.9


7.4


8.3


25.2


8.25


14.00*

Hong Kong


6.3


7.1


2.0


5.4


7.44


5.25

[cybersage8]

Current Account/
DP (%)
Fiscal Balance/
GDP(%)
Foreign Reserves
(100 billion)
2007

China


8.6


0.7


16,822

South Korea


0.6


-2.3


2,605

Taiwan


8.6


-0.2


2,894

Singapore


24.3


12.2


1,758

Malaysia


15.9


-3.2


1,196

Thailand


6.1


-1.7


1,073

Indonesia


2.5


-1.2


590

Philippines


4.4


-0.2


364

India


-1.7


-4.2


2,753

Vietnam


-8.0


-4.9


250

Hong Kong


13.3


7.2


1,599