The Hong Kong economy could see a downturn in the first quarter if exports are hit by the troubled world economy. Annual growth could slip to the 1-3 percent range. That’s well below the average growth rate of around 4.5 percent over the past decade and 5 percent last year, said Financial Secretary John Tsang.

Slowing exports are expected to remain a major drag on the economy, he said.

“I’m 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,” said Tsang.

The city’s economy got off to a strong start in 2011, growing 7.6 percent year-on-year in the first quarter but decelerated markedly after that as the global economic environment deteriorated. The economy expanded 5 percent last year, after 7 percent growth in 2010.

Tsang also said he expects the external sector will see some improvement in the second half, granting that “the European debt crisis does not escalate into a full blown crisis” and the Asian markets should render some cushion to Hong Kong’s external trade.

In 2011, Hong Kong’s goods exports rose only 3.6 percent, a sharp slowdown compared with the 17.3 percent growth in 2010. Total exports of goods gained 16.8 percent in the first quarter of 2011, then decelerated to virtually zero growth in the second quarter, due to faltering demand from the major markets like the US and Europe. The situation improved only slightly towards year’s end.

On the other hand, domestic demand which held up well throughout 2011 in tandem with jobs and income growth may face some headwinds as upward pressure on the jobless rate increases.

“I expect the unemployment rate to reverse its downtrend as the economy slows down,” said the Financial Secretary.

The seasonally adjusted jobless rate fell to a 13-year low of 3.2 percent in the third quarter of 2011 before climbing back to 3.3 percent in the fourth quarter.

That said, the tourism sector, which employs nearly 220,000 people, is expected to be one of the few bright spots in an otherwise grey economic picture.

Visitor arrivals jumped by 16.4 percent to a record 42 million in 2011, almost 50 percent more than in 2007. Mainland tourists accounted for 67 percent of the total. Last year saw the number of visitors from across the border surge 24 percent to 28.1 million. As tourist shoppers stocked up from jewelry, cosmetics to household items sold in the city, total spending associated with inbound tourism rose to over $250 billion in 2011. That reflects an increase of nearly 70 percent over 2007.

To make Hong Kong a more attractive place, the government will continue to beef up tourism infrastructure, the financial secretary said. More efforts will be made to boost the supply of hotel rooms, among other things. Currently, there are around 190 hotels in Hong Kong supplying more than 62,000 rooms. It is estimated that the number of hotels will increase to 240 in 2016, supplying over 71,000 rooms.

emmaan@chinadailyhk.com