The Hong Kong government is poised to revise the territory's 2001 growth forecast and may keep a lid on taxes because of the present economic slowdown, Financial Secretary Antony Leung said yesterday.

"At the end of August we will announce a new figure," Leung said when asked by reporters about a recent spate of forecast downgrades for Hong Kong's economic performance by banks in the territory.

Hong Kong's second quarter gross domestic product (GDP) will be announced on August 31. Leung said the government was well aware of the general slowdown in major world economies, but he gave no clues as to the direction nor extent of its planned revision.

The government cut the territory's 2001 growth forecast to 3 per cent in May and some analysts believe it may be forced to trim it again due to the slowdown in the global economy and lower demand for the territory's exports.

Leung, however, held out hope that the government may for now leave intact its low and simple tax regime.

"Everyone can see Hong Kong's economy is slowing. Increasing taxes at this time may not be suitable," he said.

His comments come in the wake of public concerns after a Hong Kong government-appointed committee launched a consultation exercise on Monday to explore what types of new broad-based taxes might be suitable for the territory. Some of the ideas included raising existing taxes and introducing new ones, such as a goods and services tax, a capital gains tax. The public can give its views and the committee will submit its report to Leung at the end of the year.

But with worsening unemployment, persistent deflation and general pessimism about the economy, the opening of the tax consultation exercise quickly caused alarm.

Leung indicated that changes may be in the offing further down the road. "I feel people should examine this report and when appropriate, we can see if we can broaden our tax base and how to do it," Leung said.

Banking giant HSBC Holdings cut its 2001 economic growth forecast for Hong Kong to 1.8 per cent from 2.2 per cent last week due to shrinking global demand and weak consumer sentiment.

ABN AMRO expects Hong Kong's GDP to grow by only 1.5 per cent in real terms this year.

Agencies via Xinhua

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