Hong Kong is expected to enjoy its fourth straight year of above-trend economic growth in 2007, fuelled by robust consumer spending, healthy exports and falling unemployment, the University of Hong Kong says. 'After three consecutive years of strong growth, the global economy is expected to have a mild slowdown,' said Alan Siu Kai-fat, executive director of the university's Apec Study Centre. 'Given a weaker external environment, Hong Kong's real gross domestic product growth will moderate, but will still be above trend.' In the first three months of the year, growth is estimated at 5.5 per cent, slightly down on the previous quarter's projected 5.8 per cent. The university believes the economy grew 6.5 per cent last year, in line with the official estimate, and will grow between 5 per cent and 6 per cent this year. In a December survey of 500 Hong Kong small businesses by HSBC, 55 per cent said they expected growth to be at least 5 per cent this year. The bank estimates the economy will grow by 5.3 per cent. Richard Wong Yue-chim, director of the study centre, said much of last year's growth was driven by domestic demand, with private consumption accounting for 2.7 points and gross investment 1.7 points of the 6.5 per cent growth. The university is looking at private consumption growth to ease to 5.8 per cent this quarter from a projected 6.3 per cent in the fourth quarter of last year. The outlook for gross investment is slightly better - rising to 4.1 per cent from 3.9 per cent - although the slide in investment in land and construction will probably continue as a result of the lack of major infrastructure projects coming online. The university expects land and construction investment to shrink 5.8 per cent this quarter. Professor Siu warned that even though consumer prices were forecast to continue rising, reaching 2.5 per cent this quarter, the recent revival of the housing rental market might cause a sharper increase in inflation. Growth prospects might also turn for the worse if expected milder growth in the US turned into a more severe slowdown. He is forecasting US economic growth to ease from an estimated 3.4 per cent last year to about 3 per cent this year. Compared with the US, Hong Kong can keep its interest rates relatively low now because it is flush with liquidity. Professor Siu believed much of the liquidity in Hong Kong was connected to speculation that the appreciating yuan would eventually result in a more valuable Hong Kong dollar. However, if the US dollar weakened further, interest rates would rise, forcing Hong Kong rates to increase because of the currency peg.