Everyone agrees that next year is going to be tougher than this year for Hong Kong's economy, but lately it seems people have been competing to come up with the most pessimistic forecasts possible. Visiting New York last week, Chief Executive Donald Tsang Yam-kuen warned that Hong Kong's growth rate could sink as low as 2 per cent next year, down from about 5 per cent this year. Not to be outdone, the International Monetary Fund said this week that a slump in the global economy could even force the city into recession next year. And to add insult to injury, the IMF warned that even though output could contract, consumer inflation would remain relatively high, at between 4 and 5 per cent, as rents catch up with the rise in property prices over the last couple of years. Couple these forecasts with recent predictions that residential property prices are poised to dive by as much as 20 per cent next year, and the outlook for 2012 begins to look bleak indeed. But don't be too downhearted. Both Tsang's forecast of 2 per cent growth and the IMF's recession warning are very much worst-case scenarios. The probability of either being realised is small, and there are solid reasons to believe that Hong Kong's actual performance next year will be a good deal more robust. But economists are, by nature, a dismal bunch, and they have a lot to worry about at the moment. Top of their list is the prospect that the euro zone's debt crisis will cause a deep recession in China's largest export market and weigh on growth in the United States. This would affect Hong Kong in two main ways. The first is through the financial channel. As regulators push European banks to raise their capital-to-asset ratios, analysts fear the banks will comply by cutting back their assets in Asia. Considering that European banks are huge lenders to the region, and that Hong Kong is by far their biggest market, with almost US$400 billion of loans outstanding in June, the concern is that deleveraging could severely reduce the amount of credit available to companies in the region, slowing business activity. The second way Europe's crisis could hurt Hong Kong is through slowing European demand for Chinese exports. A slump in demand would hurt Hong Kong's transshipment and logistics industries, as well as its fast-growing trade services sector. As a result, the 11 per cent fall in the city's total exports over the last 12 months looks ominous. Happily, some of these fears appear overblown. Sentiment towards the Hong Kong property market may be depressed right now. But as the IMF's senior adviser for the Asia-Pacific, Nigel Chalk, stressed this week, supply is short and mortgage rates are low by historical standards - both of which should help support prices next year. What's more, with the labour market tight, incomes are rising. Consultancy Mercer says employers will increase salaries by an average of 4.6 per cent next year, and pay bonuses equal to two and half months' salary. On top of that, worries about the impact on Hong Kong's economy by the deleveraging of European banks appear exaggerated. According to Chou Win Lin, professor of economics at City University, financial conditions have surprisingly little effect on Hong Kong's output. Chou, who has developed a sophisticated model of the city's economy based on 89 variables, maintains that trade swings are by far the biggest factor influencing the city's growth. And on trade, there is some cause for optimism, given that recent data shows that US consumer demand remains strong, while Germany and the core of the euro zone still enjoy robust economic health. As a result, her model is indicating only a modest slowdown in Hong Kong's growth rate to 4.3 per cent next year, with the jobless rate climbing to 3.8 per cent. To put those numbers in perspective, since the 1997 handover, Hong Kong's rate of growth has averaged just 3.6 per cent, while the average jobless rate has been 5.2 per cent (see charts). So despite all the gloom, Hong Kong should still deliver an above-average performance next year. It makes you wonder what everyone is so worried about.