Officials admitted for the first time yesterday that the 3.5 per cent economic growth forecast for this year was unlikely to be reached. Financial Secretary Donald Tsang Yam-kuen, who will today announce negative growth for the first quarter, said the economic situation was the most volatile he had seen in his 30-year career. Tung Chee-hwa declined to say whether Hong Kong was heading for a recession, but said the slowdown 'may last one quarter, two quarters and it may last even a little bit longer'. The last time the economy shrunk was in mid-1985. On Sunday, Mr Tsang said it would be 'premature and unnecessary' to revise his GDP forecast, estimated at 3.5 per cent in his 1998-99 Budget in February. But yesterday, he said the effect of the Asian financial crisis 'goes much further than I had first thought'. 'In the light of further deterioration in economic conditions across the region as well as locally in the more recent months, I share the view, which has been expressed by many commentators, that our earlier forecast of economic growth for the current year is likely to be unattainable. 'However, what lower level of growth it should be is impossible to assess with any precision at this stage, as the situation in the region continues to be volatile week by week.' The efficiency of the economy meant that external events were reflected very quickly, he said. 'The position that we are now in is, in my view, unprecedented. 'I have never experienced a situation as volatile as this over my 30 years of service as a public servant,' he said. However, Mr Tsang was confident the economy would rebound when the regional situation had settled. Mr Tung, whose comments on negative growth on Tuesday sent the Hang Seng Index down almost five per cent on Wednesday, said the economy might shrink for at least two quarters. But he said he would not describe the turmoil as a recession. 'I hate to use that word because the economists' definition of recession is one thing, ordinary people's interpretation is one thing, so I just would say, yes, there will be a slowdown in the economy; there might even be negative growth in the first quarter. 'Whether this is a recession depends on how you frame your definition but I will say that the economy is definitely slowing down - slowing down substantially,' he said. Mr Tung said 'correction in other aspects will now begin and you will see unemployment rising' following the fall in property prices. 'But it is a necessary correction for us to move ahead and be competitive again and to regain our economic vitality.'