HONG KONG - HONG Kong projects its economy will contract in the first half of 2009, extending a recession brought on by the global financial crisis and economic downturn.
The territory tipped into recession in the third quarter of last year as exports and consumption weakened. Chief Executive Donald Tsang told a conference on Monday that the territory projected gross domestic product had contracted in the fourth quarter.
'We have a long and difficult road ahead of us in terms of economic recovery,' Tsang said. 'We anticipate negative growth figures for the fourth quarter of 2008 and negative growth for the first half of this year.'
Mr Tsang said some economists forecast the economy could start to recover in the second half but he said that would depend on the global economy.
The territory's economic slump marks a swift reversal from a boom that saw gross domestic product grow by an average 7.3 per cent between 2004 and 2007 as the city benefited from China's surging economic growth.
However, as an open economy and financial and trading hub, the territory is now being hit hard by the global downturn and by China's economic slowdown.
Mr Tsang said last week that exports from Hong Kong in December saw a double-digit decline from a year earlier. That is the first double-digit drop in seven years, tracking a regional trend as U.S. and European demand for Asian goods is weakening.
Consumers are reining in spending amid rising unemployment and expectations that many companies will freeze wages this year and because their wealth is being eroded by falling property prices and a near 50-percent drop in the local stock market last year.
The International Monetary Fund has forecast Hong Kong's economy will grow 2 per cent in 2009 but some economists say gross domestic product will contract by 1 per cent. That would make it the worst performing economy in Asia after Singapore, which is also in recession and expected to shrink 2 per cent this year, according to some forecasts.
The Hong Kong government has announced a series of measures to help the territory weather the economic and financial crisis, including loans to small businesses and guaranteeing bank deposits for two years. -- REUTERS