The financial fire-storm that swept through Asian economies last year will retard growth well into the new year, economists say. Last year will be remembered as much for the tumultuous economic events that rocked the region as for Hong Kong's return to China. It was the year where the feted tiger economies had their claws pulled and where a miracle decade of growth appeared to evaporate. The dangers of global capitalism became apparent as the collapse of one economy triggered a domino effect across the region. In its wake there came an ever-rising tide of company collapses, unemployment, tightening credit and slashed down growth forecasts. The slowdown will extend beyond Asian shores affecting global output and growth. Hong Kong's barometer of its top blue-chip companies, the Hang Seng Index, hit record heights before testing three-year lows. Multilateral agencies, such as the International Monetary Fund and the Organisation for Economic Co-operation and Development, have downwardly revised their global growth forecasts as a result of the extraordinary events in Asia during the second half of last year. Most economists are predicting a sluggish first six months with some signs of recovery in the second half. Asset prices are likely to continue to deflate resulting in a subdued housing market and weak consumer demand. Tourism, which accounts for about 8 per cent of the gross domestic product is unlikely to turn around in the next 12 months, which adds pressure to the slowdown in exports of services. Fixed capital formation is also expected to be slow because of higher interest rates. The services sector, which accounts for more than 80 per cent of growth, will need to respond to mixed pressures. Falling property prices and costs will bring down the cost of doing business in Hong Kong while the longer term benefits of a stable currency and monetary environment will enhance its status as a regional trading centre. This will be offset by the slowdown in economic activity in regional economies. Economists have been downwardly revising their forecasts for the coming year but are falling short of predictions of a recession. The big concern is what the mainland will do with its currency. If Beijing decides to devalue the yuan to boost exports and growth it could undermine Hong Kong's currency and stock market. A rate rise in the US could also hurt by pushing up local interest rates. Local economists generally believe growth will moderate rather than plunge in the wake of regional turmoil. Hong Kong's General Chamber of Commerce predicted growth of about 4 per cent with inflation continuing to fall to about 5 per cent, down from 5.2 per cent this year. External trade growth is to slow with the merchandise trade deficit narrowing, the chamber said. The unemployment rate is expected to rise from 2.2 per cent to about 2.8 per cent. Investment bank Salomon Smith Barney also thought growth would flip to 3 per cent with inflation stable at 5 per cent compared with an average of 9 per cent in the past 15 years. Both Standard Chartered Bank and the Chamber of Commerce believed real growth for next year was likely to be about 4 per cent while inflation was expected to hover near 5 per cent. Hongkong Bank, while defining this year as a 'year of adjustment', forecasted a 4 per cent growth in GDP and a 5.3 per cent inflation rate.