79.     I remain cautiously optimistic about the external economic environment in 2005.  Latest indicators show that the US economy is still expanding at a reasonably solid pace, and there is only expected to be a modest increase in US interest rates.  The economies in the European Union will also continue to expand.  The outlook for the East Asian economies in the short term remains promising.  The Mainland's economy will maintain its strong momentum, and the macroeconomic adjustment measures should help address the imbalances in some sectors and should be conducive to long-term economic growth.  Taking these factors into account, we can expect the global economy to fare well in 2005, though its growth rate may not be as impressive as in 2004.

80.     Hong Kong's external trade is again expected to perform strongly in 2005, as the earlier weakness of the US dollar will still be advantageous to our export competitiveness in the short term, and as the global economic outlook is promising.  With the opening of Hong Kong Disneyland, inbound tourism will continue to thrive.  Private consumption expenditure should advance further, buoyed by improved employment income and positive developments in the asset markets.  The robust overall demand for goods and services will in turn induce new investment expenditure.

81.     In overall terms, Hong Kong's economy is expected to achieve solid growth in 2005, with GDP forecast to grow by 4.5 to 5.5 per cent.  With a further pick-up in the economy and the development and implementation of various tourism and infrastructure projects, overall employment opportunities look set to increase further, and the unemployment situation in Hong Kong will continue to improve.  Inflation will remain modest, with the Composite Consumer Price Index expected to rise by a mere 1.5 per cent for the year.

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