With generally favourable external conditions in the first half of 2004, Hong Kong's economic recovery became more broad-based and sustained, the Hong Kong Monetary Authority says in its second Half-Yearly Monetary & Financial Stability Report.

Published in its Quarterly Bulletin, the report said real GDP rose by 6.8% in the first quarter of 2004, the strongest year-on-year growth since the fourth quarter of 2000.

"The Government forecasts 6% growth for the entire year. The unemployment rate declined to 7.1% in the three months to April 2004, down from 7.3% in the three months ending in January," the report said.

"A sustained recovery in property prices brought the estimated number of residential mortgages in negative equity down to around 40,000 at the end of March.

"Despite volatility in the stock market in May, reflecting external pressures, financial markets have been generally stable."

It concludes that conditions for Hong Kong are generally favourable in the first half of 2004.

Features examine jobless sources, CNY cash demands

This issue of the Quarterly Bulletin also contains feature articles on:

* Sources of unemployment - examining the sources of the persistently high unemployment rate in recent years and assessing the natural rate of unemployment.

* Demand for cash around Chinese New Year - exploring the impact of Chinese New Year on demand for currency notes and estimating the seasonal pattern.

* Results of the 2003 survey on credit derivatives and asset securitisation activity - providing survey results that show banks' participation in the credit derivatives market has increased, but their positions were relatively small.