HONG KONG: The city's economy, together with that of several Asia-Pacific entities, will likely contract by at least 2 percent this year, the Washington-based International Monetary Fund (IMF) said yesterday.

Next year, the economies of Hong Kong, Taiwan, South Korea, Malaysia, Thailand and New Zealand will grow by no more than 1.5 percent, the lender said in its latest Regional Economic Outlook.

It said most Asian economies would face sharp contraction in 2009 owing to a sluggish export demand and a tightening financial condition.

Asia's economic growth would probably be pared down to 1.3 percent this year, from 5.1 percent in 2008, and is likely to rebound to 4.3 percent in 2010.

The IMF said China's mainland will grow the most in Asia over the next two years, expanding 6.5 percent in 2009 and 7.5 percent in 2010. By contrast, Singapore's economy, which is heavily reliant on trade, finance and tourism, will shrink by 10 percent in 2009 and 0.1 percent in 2010.

The region's economic growth has relied heavily on export and international financial flows, which explained the severe impact it suffered and a weak recovery after the financial crisis, the report said.

"Hong Kong's economy could contract as much as 3 percent or worse, which is largely dependent on the health of America's banking system and the future impacts of H1N1 influenza," the IMF added.

Despite some recovery signs in the exports and manufacturing sectors in recent months, the IMF said, "even if these nascent trends continue, stabilization is far from recovery."

The IMF also suggested governments and central banks cut interest rates and implement unconventional measures to extend access to credit.

(HK Edition 05/07/2009 page16)