One reason for this is that after the Asian crisis and its repercussions, there is still unutilised capacity in the world economy. Another important factor is increased price competition. In addition, the pass-through from external price increases to prices in Sweden will be dampened by an appreciating krona. In our main scenario, moreover, the barrel price of crude oil is assumed to fall back from the present level around $ to just over $ The stronger international growth has also contributed to an upward revision of the Riksbank’s forecast for the domestic economy. Growth is now expected to be 3.6% this year, followed by 3.8% and 3.0% in 2000 and 2001. The upward revision also mirrors higher domestic demand growth. Firms as well as households are optimistic about the future. Real wages and employment are now rising rapidly and so is household income, particularly as fiscal policy is less restrictive. This is accompanied by rising corporate investment in the coming years. (Figure 2). BIS Review 111/1999  4  One component of the present picture that warrants the Riksbank’s attention is the development of asset prices. Share prices are high and a nationwide increase in house prices has started in the past year. House prices in Greater Stockholm, for example, had already risen substantially before that. This increases the consumption and investment propensities of households and firms.
The banking market in Hong Kong is of course a very international one, with a total of 182 licensed banks, 151 of which are incorporated outside Hong Kong. 81 of the largest 100 banks in the world are licensed in Hong Kong. Collectively they provide a wide range of banking and other financial services, not just for Hong Kong but for the region as a whole. The banking sector of Hong Kong is reputed to be amongst the most efficient and profitable in the world. 9. Hong Kong’s debt market, which has developed quite rapidly in the past eight years, is also playing a significant role in the region. Financial intermediation through the debt market is still relatively underdeveloped in the region, but the prospects are good. As the very substantial savings of the region is increasingly institutionalized through the establishment of provident funds and pension funds, the demand for debt securities would grow, perhaps much faster than that for banking and equity instruments. At the same time, the huge investments envisaged for the development of the physical infrastructure in the region will require much debt financing, thus increasing the supply of debt securities. With the first class infrastructure in our newly developed debt market, Hong Kong is in a very favourable position to take advantage of these good prospects. 10. Hong Kong’s equity market is of course one of the largest and most liquid in the world, and, notwithstanding recent volatility, is the favourite market for institutional investors and for those wishing to raise funds.