Hong Kong's economy may have shrunk by as much as 3 per cent in the first three months of the year as investor and consumer confidence waned and the impact of regional woes took their toll, economists said yesterday. While a minus 3 per cent rate was at the bottom end of market estimates, most financial experts were betting on a negative figure for the first time since 1985. Economists said they would be revising their annual growth rate forecasts downwards in the wake of comments made during the week by Financial Secretary Donald Tsang Yam-kuen and Chief Executive Tung Chee-hwa. Yesterday, Mr Tsang further underlined the gloom, conceding the Government's own forecast of 3.5 per cent annual growth would be 'unattainable'. At the opening of the International Travel Expo Hong Kong, he said Hong Kong's economic position at the moment was 'unprecedented', although the volatility across Asia made it impossible to predict a revised rate. 'Many of the economies in the region and elsewhere are suffering badly . . . Hong Kong, being what we are, cannot be immune to this plight,' Mr Tsang said. The last time growth fell as low as minus 3 per cent was in early 1975 at the height of the world's oil crisis. Even during 1989 when Tiananmen Square and Beijing's austerity programme sapped the economy's energy, gross domestic product remained above zero. An analyst at Goldman Sachs said the investment bank's initial forecast of 1.5 per cent growth for the quarter now looked unlikely to be met and would be lowered after the release today of the Government's first quarter economic report. Merrill Lynch was similarly bearish ahead of today's release, with senior economist Shawn Xu saying an easing of its full-year forecast from 2 per cent was likely. 'Hong Kong people have a tougher time ahead. I think this kind of readjustment . . . is something we have to follow,' Mr Xu said. 'In the long run, it should be good for the economy but in the short term it is hurting, it is going to be painful. But that is the cost of readjustment.' Morgan Stanley's greater China economist Andy Xie predicted the quarterly rate would fall to between minus 0.1 per cent and minus 0.5 per cent. Unlike others, Mr Xie saw no reason to change his forecast of 2 per cent growth for the year, despite warnings from the Government its own estimates would not be met. In contrast, Bank of America's Asia research head Andrew Freris said negative quarters in Hong Kong were a 'penny-a-dozen' and he was not concerned at the downturn. He would not be revising his annual forecast until the release of the quarterly number. 'It's bad news, but this is not going to give me sleepless nights,' Mr Freris said. The chief economist at Hong Kong General Chamber of Commerce, Ian Perkin, was reluctant to give a precise number, but feared his earlier belief the economy would manage to stay in positive territory, was now at risk. 'I've heard so many numbers today and the range is enormous. I was hoping that it would be on the positive side but not much, maybe 0.5 per cent,' Mr Perkin said. Earlier this week, the Government announced that retail sales volume had dipped 13 per cent in March.