Hong Kong Economy Forecast to Grow 4% to 5% in 2010

The Hong Kong Special Administrative Region (HKSAR) government in November revised its full-year economic forecasts upward to a contraction of 3.3 percent.

The HKU forecast for the fourth quarter represented a downward revision from the university's previous forecast of 1.0 percent released in October.

Siu said the strong rebound expected in the first quarter, from a very weak first quarter in 2009, should not be interpreted as a sign of robust growth, but rather as further evidence for the tepid recovery started in the second half of last year.

The performance of the Hong Kong economy largely depends on external demand, which was expected to rebound mildly in 2010, he said.

The exports of Hong Kong was estimated to fall by 0.8 percent in the fourth quarter of 2009, and by 12.1 percent for the full year. A reversal to positive growth of 10.8 percent was expected in the first quarter of 2010, HKU said.

Unemployment rate was expected to drop slightly to 5.0 percent in the first quarter of 2010. CPI inflation was forecast to increase, with headline inflation estimated to be 0.7 percent in the first quarter.

Siu said there were risks to the economic recovery of Hong Kong, including carry trade and the real condition of the United States housing market.

A double-dip recession, though "unlikely, is a possibility," he said.