Hong Kong Says Economy Slowed In 2011

Published February 1, 2012 4:27AM (EST)

HONG KONG (AP) — Hong Kong's economic growth fell further in the final quarter of 2012 as global trade weakened, and the government forecast an anemic expansion this year.

The economy expanded by 3 percent in the three months ending in December, following a steady decline from 7.6 percent in the first quarter, Finance Secretary John Tsang said in an annual budget speech.

Inflation jumped to 5.3 percent from 2010's 1.7 percent as stimulus measures by major governments caused an influx of money into the territory, but pressures eased in the fourth quarter, Tsang said, according to a text released by the government.

Tsang forecast growth of no more than 1 to 3 percent for 2012. He said the government plans to spend 80 billion Hong Kong dollars ($10.3 billion) on stimulus measures.

Hong Kong's open markets and status as a major trading center have made it one of Asia's most prosperous economies but also left it exposed to the plunge in U.S. and European demand. Hong Kong is also one of Asia's busiest ports, handling a large share of goods from China, the world's biggest exporter.

"Given the bleak economic prospects in Europe and the U.S., the risk of a sharp deterioration of the external environment is increasing," Tsang said.

"I am not optimistic about Hong Kong's export performance in the first half of this year, and if exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter," he said.

Hong Kong is a Chinese territory but has a high degree of autonomy and its own currency and customs system.

Exports rebounded in 2010 following the global crisis but fell again in mid-2011, Tsang said. He said exports contracted in the third quarter and grew by just 3.6 percent for the full year.

Hong Kong chief executive Donald Tsang has warned that the territory faces an unusually severe shock due to the European debt crisis.

In an interview with broadcaster TVB from the World Economic Forum in Davos, Switzerland, the chief executive said conditions are more worrisome than they were during the 1998 Asian financial crisis.

"It's rare to see all these three problems emerge at the same time," he said.

By Salon Staff

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