Hong Kong was officially in recession in the first half of last year, according to revised gross domestic product figures released by the Government yesterday. The revised seasonally adjusted figures show the economy shrank 0.5 per cent in the first quarter of last year on the last quarter of 2000, plunging further to minus 1.4 per cent in the second quarter. Preliminary figures showed it had grown 0.3 per cent in the first quarter. The figures show the economy entered recession - defined as two quarters of negative growth - long before the impact of the September 11 terrorist attacks were felt on the Hong Kong economy. On a year-on-year basis, figures released yesterday showed GDP growth in the fourth quarter of last year fell 1.6 per cent following a 0.4 per cent drop in the third quarter, revised down by the Government from its preliminary minus 0.3 per cent figure yesterday. Many economists were expecting the fourth quarter of last year to contract more than 3 per cent. Hang Seng Bank senior economic research manager Vincent Kwan Wing-shing predicted Hong Kong would stay in recession in the first and second quarter of this year. Last year's full-year GDP growth of 0.1 per cent was better than market predictions which ranged from zero to minus 0.5 per cent, he said. Financial Secretary Antony Leung Kam-chung yesterday forecast 1 per cent growth this year, a more pessimistic view of the economy's future than most private economists who have forecast a mean growth of 1.7 per cent, although some go as high as 3.6 per cent. Morgan Stanley economist Denise Yam Wing-yan said she would stick with her 1.8 per cent forecast this year 'because I'm less optimistic on deflation, I'm still looking for a substantial adjustment in prices'. Ms Yam said the United States economy - Hong Kong's second-biggest market after mainland China - was recovering faster than the market expected. American Chamber of Commerce in Hong Kong chairman Jim Thompson believed economic growth for this year would be around 2 per cent to 3 per cent. Mr Thompson said: 'I think [Mr Leung's forecast] is more conservative than we would anticipate, and I would like to believe he hopes it will be better than what he said.' Australian Chamber of Commerce and National Australia Bank economist Kevin Lai said he was likely to downgrade his 2.5 per cent growth estimate for this year because latest economic indicators were 'as awful as they were in 1998/99 following the Asian crisis and the labour sector is worse than it was then'. Mr Lai said Mr Leung's 1 per cent growth forecast made sense because a low forecast made it easier to achieve his goal of cutting public spending by a greater percentage than economic growth. HSBC chief economist for greater China George Leung Siu-kay said if the Financial Secretary was successful in testing the waters of public sector reform by cutting civil service salaries 'this will be a great budget'.
