HK cuts 2001 GDP forecast


Hong Kong is expected to confirm it has slipped into recession when it releases third-quarter GDP figures late Friday

By staff and wire reports

HONG KONG, China -- Hong Kong slashed its full-year gross domestic product growth forecast to zero, down from its previous forecast of one percent growth.

It also revised its 2001 composite consumer price index forecast to negative 1.6 percent from its previous estimate of negative 1.3 percent.

Analysts had predicted Hong Kong would announce it had slipped into its second recession in four years.

That would have put it in with Singapore, Taiwan, Malaysia and Japan as Asian economies that are either already in recession or expected to be in recession before the end of the year.

Likely to shrink 1.5% this year

Deutsche Bank chief economist Michael Spencer told CNN television Friday morning that he expected Hong Kong's economy would shrink 1.5 percent this year and be "slightly negative" next year.

He said there was little that Hong Kong could do other than wait for global recovery. With an expectation that the U.S. should start to recover in the second quarter of 2002, this would flow through "fairly quickly" to Hong Kong.

"We expect to see positive growth in Hong Kong in the third quarter of next year," he said.

But before that that, the recession in Hong Kong will bite deeply. Exports have already fallen 3.5 percent in the first nine months of the year, compared to the same period a year ago.

The December quarter is likely to see exports fall further and consumer demand slip as the jobless rate rises towards 6 percent.

George Worthington, chief economist for IFR's Asia-Pacific Economic Monitor, said Hong Kong's third-quarter outlook was for a 2.5 percent contraction year on year.

The consensus from economists polled by Reuters news agency is for a 2.07 percent contraction year on year. On a quarter-on-quarter basis, the consensus is for a 1.2 percent fall.

Reuters contributed to this report.