Hong Kong economy seen contracting in Q1

HONG KONG: Hong Kong’s economy could shrink in the first quarter of 2012 because of weak export markets, before rebounding to post growth of 1 percent to 3 percent over the year, the finance secretary said on Wednesday.

John Tsang warned that the global economy was facing a downturn worse than the 2008 financial meltdown as he released his annual budget in the southern Chinese banking center.

Turmoil in financial markets and “unresolved economic troubles” related to the debt crisis in Europe and the United States “could deal a more serious blow to the global economy than the 2008 financial tsunami”, he warned.

Delivering a budget that promised stimulus spending and one-off perks, Tsang added that the semi-autonomous territory would “inevitably” experience lower growth than the average of the past decade.

Exports could take a hit in the early months before recovering in the second half, he said in a speech that was interrupted by shouted protests from opposition lawmakers.

“I am not optimistic about Hong Kong’s export performance in the first half of this year, and if exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter,” he said.

The city’s economy contracted in the second quarter of 2011 before returning to positive territory in the third quarter.

“I forecast GDP [gross domestic product] growth of one to 3 percent in real terms for 2012,” Tsang said, adding that the economy expanded 5 percent in 2011.

“It is difficult to predict with any certainty the possibility of a severe recession in Europe and, if so, the precise ramifications on Asia,” he added.

In his last budget ahead of March elections to select a new chief executive in the former British colony, Tsang promised HK$ 80 billion ($10.31 billion) in relief measures to “better prepare our people for the difficult time ahead”.

He pledged to increase loan guarantees for lenders to small businesses, slash profits tax and spend more on education, including construction of a new International Cuisine College to train chefs.