Hong Kong's tourism industry stands to benefit as the US dollar's weakness against Asian currencies boosts spending on overseas travel in the region, according to a local economist. The head of Asian economic research at SG Securities, Steven Xu Sitao, said stronger Asian currencies were likely to encourage more people from South Korea, Japan and Taiwan to travel abroad, and Hong Kong might be capitalise on the trend. Last Thursday, the US dollar fell to a 10-month low against the Japanese yen for the second consecutive day on the back of ongoing concern about United States accounting practices and weak US stocks. But Mr Xu ruled out the possibility of the the US dollar going into free-fall. The greenback had fallen by more than 10 per cent from an all-time high, he said, but such a drop was not considered a collapse. He said there were still some problems on the regional horizon. Some Asian currencies, such as the Thai baht, were no longer undervalued and the Japanese economy was still in poor shape. However, Hong Kong's depressed economy could not be blamed on external factors. Mr Xu said Hong Kong's export growth was good but the domestic economy remained in the doldrums. Weakening domestic consumption was further confirmed when retail sales plunged 5.9 per cent year on year to HK$15.5 billion in May - the year's sharpest decline. An unemployment rate of 7.4 per cent in May, which held back consumer spending, had also weakened investors' confidence because they expected their rate of return on investments was likely to fall. The confidence of consumers and investors had also been undermined by a lack of clear government policy on issues such as housing. 'How do we convince people to increase consumption and increase private investment amid such an unfavourable environment?' Mr Xu said. The government was facing a 'twin deficit' problem - a physical deficit and a credibility deficit. He urged the government to map out clearly how it would increase revenue to balance the budget. But he said it was not a good idea to raise taxes because that would be a further blow to consumption. He forecast Hong Kong's gross domestic product would grow by 1.5 per cent this year.