RTTNews - Hong Kong's economy contracted the most, since records began in 1990, during the first three months of the year, putting pressure on the government to announce further measures to stimulate the economy. The bleak outcome prompted the government to lower its economic and inflation outlook for 2009.

Gross domestic product or GDP fell 4.3% in real terms in the first quarter on a seasonally adjusted quarter-on-quarter basis, official data showed Friday. The economy shrunk for the the fourth consecutive quarter and follows a 1.9% decline in the final quarter of 2008. At the same time, the government lowered its economic outlook for 2009 to predict a contraction of 5.5%-6.5%, down from 2%-3% decline forecast in the Budget round.

Compared with the first quarter of 2008, the economy shrunk 7.3% following a contraction of 2.8% in the fourth quarter. This is the largest decline since the third quarter of 1998 when the economy was severely battered by the Asian Financial Crisis. Meanwhile, economists had expected a 5.3% decline in GDP.

Hong Kong's Chief Executive Donald Tsang on Thursday promised to announce more economic relief measures in a month to shore up the economy. The government had announced measures to tackle financial crisis as recession deepened in the fourth quarter.

The government also lowered its inflation outlook for this year. The headline Composite CPI is now expected to grow 1% in 2009, down from an earlier forecast of 1.6%. The corresponding forecast for underlying inflation rate is revised down to 0.9% from the earlier prediction of 1.5%.

Like many other economies in the region, Hong Kong's merchandise exports faced the double blow from a sharp plunge in global demand and from an acute fall-off in intra-regional exports. Total exports of goods plummeted 22.7% in the first quarter over a year earlier, the largest decline since the second quarter of 1954. On the other hand, exports of services declined 8.2%, similarly hit by the plunge in global and regional demand. The government expects total exports to remain sluggish in the near term, given the difficult external environment.

The difficult economic situation weakened private consumption expenditure, which fell 5.5% year-on-year. However, the pace of decline in the household spending slowed on a quarterly basis, thanks to various measures announced by the government and improvements in the local stock and property markets. Further, overall investment in the first quarter dropped 12.6% over a year earlier.

Labor market conditions continued to worsen in face of the economic contraction and the seasonally adjusted unemployment rate rose to 5.2% in the first quarter.

Another data showed on Friday that bankruptcy petitions in Hong Kong soared 56% in April from a year earlier to 1,490. However, that was lowest monthly total since January.

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