Hong Kong may suffer a severe economic depression in the worst-case scenario under the global financial crisis, the government has warned. A government paper reviewing the macroeconomic environment said the local economy was likely to experience a significant slowdown in the coming year, following developments in European countries and the United States. 'Hong Kong may sink into a quagmire with negative economic growth, plunging asset and property prices, and rising unemployment,' the paper predicted of the worst-case scenario, in which Europe and the US fell into deep, long-term recession with the mainland affected. The document said it would be difficult for Hong Kong businesses that conducted low value-added processing on the mainland to survive for long. The situation in the goods and services export sectors was not looking optimistic either, it said. The government has set down easing inflation, supporting the working poor, strengthening ties with the Pearl River Delta and seeking co-operation with countries in the Association of Southeast Asian Nations - among other solutions - as ways to cope with the economic slowdown. Ho Lok-sang, Lingnan University economics professor, said the scenario presented in the paper was very unlikely to occur because central banks of various countries had already stepped in to rescue the market. He said that since Hong Kong's gross domestic product was first recorded in 1961, it had contracted only once. 'It went up even during the Cultural Revolution, twice in oil crises and when the city's political future was uncertain,' he said. 'The only time GDP dropped was in 1998, but that was because our property market was in a severe imbalance of demand and supply ... This is not the case now.' The Commission on Strategic Development will discuss the paper next Thursday.