Updated at 4.10pm: Hong Kong still faces a number of economic challenges ahead, warned Financial Secretary Henry Tang Ying-yen on Wednesday. In his second budget speech, Mr Tang stressed that the territory could not afford to be complacent. ?Although our economy is back on an upswing and the fiscal position of the government has improved, we are still faced with many challenges,? he said. Mr Tang noted that Hong Kong?s economy could be sensitive to external factors. ?Being highly externally-oriented, our economy is very sensitive to outside factors such as oil prices, fluctuations in US dollar exchange and interest rates, the pace of the mainland?s economic growth and changes in its policies,? he said. Mr Tang said the mainland?s rapid economic growth has brought intense competitions to Hong Kong, apart from its benefits. ?The development of the mainland has also emerged as a strong competitive force for Hong Kong, threatening even some of our industries which had long had an edge over our competitors, such as logistics,? he said. Mr Tang said unemployment and the structural deficit were still potential problems in the local economy. ?For example, unemployment in certain industries remains high, our economy is undergoing adjustment and the problem of the structural deficit has yet to be resolved,? he said. ?On the other hand, as our economy continues to improve, we must assiduously monitor inflation and property price movement, so as to avoid a major increase in business costs,? the Financial Secretary added. Mr Tang also pledged to help promote economic growth by maintaining a favourable environment for business.