RTTNews - Friday, the Hong Kong Census and Statistics Department said in a preliminary report that the gross domestic product or GDP in real terms declined 7.8% year-on-year in the first quarter compared with a revised 2.6% drop in the fourth quarter. Economists had predicted a decline of 5.3%.

The annual GDP fall was the largest since the third quarter of 1998 when the economy was severely battered by the Asian Financial Crisis, the statistical office said.

On a sequential basis, the GDP dropped a seasonally adjusted 4.3% in the first quarter.

Among the main GDP components, private consumption expenditure dipped 5.5% annually in the first quarter, after falling 4.1% in the fourth quarter. At the same time, the government consumption expenditure increased 1.5% compared with a 1.8% growth in the fourth quarter.

The International Monetary Fund said that, as the pace of deterioration in global demand is markedly worse than earlier expectations, leading to the severe contraction in Hong Kong economy in the first quarter, and also taking into account the considerable markdown in world economic outlook since the Budget round.

The GDP for 2009 as a whole is now forecast to contract by 5.5% to 6.5% in real terms, worse than the forecast decline of 2% to 3% put out in the Budget round.

On inflation outlook, the forecast rate of increase in the headline Composite CPI for 2009 is marked down to 1%, from 1.6% in the Budget round. The corresponding forecast underlying inflation rate is revised accordingly to 0.9%, from the earlier forecast of 1.5%.

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