RTTNews - Tuesday, Hong Kong announced additional HK$16.8 billion stimulus package to shore up the economy, which sunk deeper into recession in the first quarter of the year.

The economy is facing severe challenges, Financial Secretary John Tsang said in a press conference, while detailing the package.

The global financial crisis has hit Hong Kong severely as demand shrank considerably internationally. In the first quarter, the economy contracted the most since records began in 1990.

On May 14, Hong Kong's Chief Executive Donald Tsang had announced that additional relief measures will be introduced within a month. On the next day, official data had showed that gross domestic product or GDP fell 4.3% in real terms in the first quarter on a seasonally adjusted quarter-on-quarter basis. The economy shrunk for the fourth consecutive quarter. In addition, the government had lowered its economic outlook for 2009 to predict a contraction of 5.5%-6.5%, worse than a 2%-3% decline forecast in the Budget round.

In the latest package, the government raised a waiver on salary tax payments to HK$8,000 for 2008-09 from HK$6,000. The government will pay the basic rent for 700,000 public housing estates tenants for two months, while recipients of social welfare and disability allowances will receive an additional one-month payment.

There would be a subsidy of HK$1,000 in the new school year for students from families receiving social welfare assistance. Business registration fees and entertainment and restaurant license fees will be removed for a year. Tsang added that more temporary jobs will be created through the anti-pandemic campaigns.

With the latest measures, the total stimulus package since last year's budget will amount to HK$87.6 billion, roughly 5.2% of Hong Kong's GDP.

Tsang said, Together with the measures that we put out earlier this year, with the measures all together would improve our GDP figure by about 2%.

Tsang said he is optimistic about the economy's performance in the second half of this year than the first half. He added that for the full year, the average fall in the city's GDP will be better than it was in the first quarter.

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