Hong Kong will see its economic situation worsen as early as in the first quarter of this year, with GDP growth easing significantly to 2.2 percent from 4.3 percent in the third quarter of 2011, before it improves later this year, economists said.

According to a forecast by economists at the Hong Kong University, the jobless rate has risen further to 3.5 percent from 3.4 percent lately, as external demand weakens further.

The quarterly macroeconomic forecast released on Wednesday also revised its estimation on the GDP growth of the final quarter of 2011 to 3.0 percent from the 3.3 percent forecast made in October.

GDP growth in the second half is expected to grow by 3.6 percent, moderating from the 6.4 percent increase in the first six months last month, said the release.

For 2011, GDP is forecast to increase by 4.9 percent, from the 7.0 percent in 2010, which is "a good performance" given the slowdown of the global economy, Alan Siu, executive director of HK Institute of Economics and Business Strategy from HKU, said in a media briefing, citing the city's competitor Singapore which encountered economic contraction last year.

The city's economic expansion is primarily driven by an increase in domestic demand estimated to account for 4.8 percentage points of the 4.9 percent overall increase in last year's GDP, with external demand accounting for only 0.1 percentage point of the growth, according to the forecast.

However, the job market will continue to soften in a downward economy, which is projected to rise to 3.5 percent in the first quarter of 2012 from the estimated 3.3 percent for the past three months.

Export is projected to contract by 4.5 percent in the first quarter this year, taking into account the strong 16.8 percent growth for the same period last year.

Inflation pressure is nevertheless expected to ease further in 2012 as a slower growth in aggregate demand is also expected, said Siu. The headline inflation is forecast to be 4.8 percent this quarter, down from the estimated 5.7 percent in the fourth quarter last year.

Siu said the university predicts Hong Kong's economic expansion in 2012 will stand between 2 to 3 percent. The ongoing Eurozone debt crisis, which is haunting the global economy, is not likely to wind up happily, Siu added.

According to another Hang Seng Bank report released on Wednesday, the bank expects Hong Kong's economic growth and inflation to ease to an average 4 percent to 4.5 percent respectively this year, adding the city's economic slowdown appears to be continuing although the downturn has been milder than many had expected.

"Overall growth numbers will likely turn worse in the first quarter of 2012 before getting better," Ryan Lam and Joanne Yim from the bank wrote in the report. "However, given that the global economic problems are structural and therefore can not be resolved easily, Hong Kong's expected recovery in the second half this year is unlikely to be swift."

litao@chinadailyhk.com

China Daily

(HK Edition 01/05/2012 page2)