Hong Kong's economic growth will fall in the second quarter but recover slowly in the latter half of the year, according to American Express Bank. The SAR economy grew by 2.5 per cent in the first three months of this year. 'We expect growth in the second quarter will be even weaker at 1-2 per cent,' said American Express Bank senior economist Kevin Grice. For the year, American Express Bank expects GDP to increase by 2.5 per cent - below the Government's forecast of 3 per cent. The bank expects stronger growth of 5 per cent next year. It expects the Chinese economy to grow by 7 per cent this year and 8 per cent next year, with support from public spending and investment inflows ahead of Beijing's expected admission to the World Trade Organisation. The forecasts are based on the United States economy making a slow recovery in the second half of the year. 'In terms of the US economy, we think the worst is over,' Mr Grice said. Interest-rate cuts by the Federal Reserve earlier this year were expected to boost the economy in the second half. The recovery should also gain momentum as companies stopped running down their inventories. Consumer confidence would also be boosted by the new Republican administration's tax cuts, Mr Grice said. The Federal Reserve was expected to cut interest rates by a further 25 basis points at the end of this month, with a small possibility of a half per cent cut. Japan's economy was expected to shrink further in the second and third quarters, with a possible recovery in the last three months of the year. On Monday, fears were heightened that Japan would enter its fourth recession in a decade after the announcement that GDP fell 0.8 per cent in the first three months of the year. 'Japan is the key uncertainty for economies in the Asia region,' Mr Grice said.