Chief Executive Tung Chee-hwa yesterday delivered the most pessimistic official forecast yet of a looming recession. He warned of negative growth in the next few quarters because of the global economic slowdown. Mr Tung's bleak assessment came as the Heritage Foundation, a Washington-based think-tank, ranked Hong Kong as the freest economy for the eighth consecutive year in its Index of Economic Freedom. Despite being delighted with the findings, Mr Tung admitted the economy had been badly hit by the economic downturn in the United States, Japan and Europe. 'Our economy at present is going through major difficulties. The fact is that all the major economies around the world are either already in recession or are in the process of going into a recession . . . and Hong Kong being a very externally oriented economy, we are being very badly affected,' he told a group of businessmen. 'And I see that we will have negative growth for a few quarters.' Two quarters of negative growth constitute a recession. The SAR's gross domestic product growth slipped to 0.5 per cent in the second quarter, prompting the Government to slash its forecast for annual economic growth from three per cent to one per cent at the end of August. Financial Secretary Antony Leung Kam-chung hinted last month the forecast one per cent growth might have to be revised downward. Most analysts say the third quarter figure will be negative and the Asian Development Bank has forecast minus 0.4 per cent growth for the year. The third-quarter GDP figure and possibly a second revision of the overall GPD figure are due to be announced later this month. Liberal Party chairman James Tien Pei-chun, a leading businessman, said Mr Tung might have wanted to disclose the bad economic outlook now instead of next year when he was expected to be contesting the chief executive election in March. 'All import, export, retail and land sales figures are bad. Car sales have dropped sharply. Winter sales in department stores have already begun,' Mr Tien said, adding that China's entry to the World Trade Organisation (WTO) would not bring about an immediate improvement. The chief economist of the Hong Kong General Chamber of Commerce, Ian Perkin, said it was the generally accepted view that negative growth would continue for a few quarters. George Leung Siu-kay, chief economist at HSBC Holdings, hailed Mr Tung's pragmatic, though belated, assessment of the economic outlook. He said it would be good for the public and investors to prepare for bad times by giving them the correct message. Mr Tung stressed that Hong Kong had many competitive advantages, ranging from its closeness to the mainland, location in the Asia-Pacific region as well as the rule of law and a free flow of information. 'What we are trying to do is to prepare ourselves so that when the external recovery does come, Hong Kong is best positioned to take advantage of the recovery and move forward one more time,' he said. Separately, the Financial Secretary said China's entry into the WTO would increase Hong Kong's economic growth by at least 0.5 percentage points each year.