Investment banks, academics and a business chamber slashed Hong Kong economic growth forecasts for next year yesterday and warned of a possible recession, as corporate earnings, household wealth and investor confidence continue to succumb to the widening US financial crisis. With no end in sight to Wall Street's woes despite government efforts on both sides of the Atlantic to shore up the banking system, Hong Kong was expected to face an even tougher time than during the outbreak of severe acute respiratory syndrome in 2003, the Trade Development Council warned. The dire outlook has sparked downward revisions to many growth forecasts for Hong Kong's gross domestic product. Citigroup slashed its 4.2 per cent estimate for this year to 3.6 per cent and lowered its target for next year to 2.8 per cent from 3.8 per cent. Morgan Stanley also cut its 2008 projection to 4 per cent from 4.7 per cent. Last week, JPMorgan revised its forecasts to 3.5 per cent from 4 per cent for this year and to 1.8 per cent from 4.5 per cent for next year. The official forecast remains unchanged at between 4 and 5 per cent. Chief Executive Donald Tsang Yam-kuen conceded last night that the turmoil overseas would hurt the city, but he stressed that Hong Kong was better positioned now than during the Asian financial crisis a decade ago - citing the stability of the banking and monetary system. For the fourth quarter of this year, the University of Hong Kong expects 2.6 per cent growth year on year, down from a revised third-quarter estimate of 3.2 per cent. The university had previously projected 5.3 per cent for the third quarter. This would mean a second-half growth of 2.9 per cent, or one-half of the 5.8 per cent recorded in the first half. Full-year growth is expected to be 4.2 per cent. Private consumption and gross investment were the main drivers of GDP growth and accounted for 2.3 and 1.2 percentage points respectively of this year's growth, said HKU economist Richard Wong Yue-Chim. Growth in private spending dropped sharply to 3.1 per cent in the second quarter from 7.9 per cent in the first quarter, amid falling incomes and fragile investor confidence. Spending growth was expected to ease to 2.7 per cent and 2.4 per cent in the last two quarters of this year, according to HKU estimates. Likewise, the unemployment rate would worsen to 3.8 per cent from 3.3 per cent in the fourth quarter. Alan Siu Kai-fat, executive director of the university's Asia-Pacific Economic Co-Operation Study Centre, predicted that slower economic growth was likely to continue in the first half of next year. 'I do not rule out that Hong Kong will be in a recession,' he said. Hong Kong General Chamber of Commerce chief economist David O'Rear was also less optimistic, saying: 'We'll be lucky if we have zero per cent growth next year.' Mr O'Rear said there would definitely be quarters with negative growth next year 'or maybe earlier'. The chamber is sticking to its 3.5 per cent full-year growth estimate for this year.