Economic growth will be driven once again by external trade this year but with added impetus from improving domestic consumption, according to economists. Several investment houses have revised their forecasts following the Government's estimate last week of 5 per cent growth for this year. They said the improving conditions in regional economies would provide Hong Kong with growth derived from increasing re-exports. But on top of the bullish external outlook, economists said public and private investment - which suffered a significant downturn over the past two years - would pick up. Bank of East Asia chief economist Shamus Mok Chung-yuk said large infrastructure projects, such as the Kowloon-Canton Railway Corp's West Rail project, would lift public investment, while private investment would be driven by technology purchases, such as personal computers and Internet-related share issues. A more stable housing market would also help private investment, while the levelling out and subsequent rise of economic performance would attract more foreign firms, Mr Mok said. The most bullish forecast came from Standard Chartered, which lifted its full-year growth estimate to 8 per cent, with 12 per cent year-on-year growth in the first quarter. Goldman Sachs executive director of Asian research Fred Hu Zu-liu said the neutral budget, in which no new taxes were announced, would be positive for the economy. '[The] stronger wealth effect from the recent stock market boom will buoy private consumption growth despite higher interest rates.' Mr Hu said he expected the positive growth trend set in the second half of last year to continue posing upside risk to his full-year forecast of 4.2 per cent growth. Morgan Stanley Dean Witter is expected to release an upwardly revised forecast today. Economist Denise Yam Wing-yan said the upgrade was being made mainly because of the momentum from the fourth quarter, rather than the bullish predictions contained in last week's budget speech by Financial Secretary Donald Tsang Yam-kuen. 'We are seeing recovery in all aspects but we are hoping that the real change this year will be in nominal income, which has a psychological impact on the community,' Ms Yam said. Real income effectively rose last year as the decline in consumer prices largely outweighed falls in wages. However, deflation is not expected to abate until the second half of the year, economists said. One man sticking to his original numbers is the head of regional research at Merrill Lynch, Guonan Ma. He explained that his forecast of 4.7 per cent growth had been well above consensus before the budget and that he believed the Government's estimate of economic growth might overstate the underlying strength of the economy. One development from last year that was likely to reverse was the build-up of inventories, a leading indicator of future economic activity. Nonetheless, Mr Ma expects domestic spending to pick up following on from external trade growth.