Hong Kong Special Administrative Region (HKSAR) government will likely have a surplus of 18 billion HK dollars (2.32 billion U.S. dollars) in the Operating Account for 2008-2009.

HKSAR government financial secretary John Tsang made the forecast while delivering the Budget for the fiscal year 2009-2010 at the Legislative Council here Wednesday.

But the HKSAR government was estimated to have a deficit of 4.9 billion HK dollars (632 million U.S. dollars) in the Consolidated Account, equivalent to 0.3 percent of the city's gross domestic product (GDP), Tsang said.

Fiscal reserves are forecast to stand at 488 billion HK dollars (62.97 billion U.S. dollars) in the fiscal year ending March 2009.

Tsang said in face of economic recession, he would pragmatically review the various economic segments and decisively inject impetus into the economy to bolster market confidence and provide a better environment for enterprises to play to their strengths.

He outlined multi-pronged, strategic measures to counter the current global financial crisis, including the provision of liquidity assistance to the banking system, provision of full deposit guarantee according to the principles of the Deposit Protection Scheme and the establishment of a Contingent Bank Capital Facility;

The HKSAR government also introduced new measures to address the funding needs of small and medium enterprises (SMEs).

Tsang said as a result of the financial crisis and a global economic slowdown, Hong Kong's GDP grew by only 2.5 percent in 2008, lower than the trend growth rate over the past 10 years.

The average inflation rate as measured by the Composite Consumer Price Index for 2008 was 4.3 percent due to the fall in global food and energy prices and the decline in consumer demand in the second half of last year.

"It will be a very difficult year in 2009," Tsang said, "both external trade and domestic demand are expected to remain subdued. "

He forecast that the GDP would decrease 2-3 percent in 2009, the first negative growth for a whole year in Hong Kong since the Asian financial crisis in 1998.

With the economy sinking into recession, Tsang noted the employment situation is expected to deteriorate further but the headline inflation rate in 2009 will ease to 1.6 percent.

After falling to a 10-year low of 3.2 percent in the middle of last year, unemployment in Hong Kong reversed to an uptrend with the latest figure standing at 4.6 percent.

The financial secretary said securing employment was the government's top priority in the global financial crisis.

"To our citizens, having a job is of the utmost importance," the financial secretary told the legislators in his televised budget speech, "the best way to preserve jobs is to improve our economy."

Tsang said while the HKSAR government need to create more employment opportunities in the near future, the government should concentrate on promoting medium and long-term development, strengthen Hong Kong's economic foundations, bolster the existing strengths and tap new opportunities during this worldwide economic slump.

Tsang said he gave priority to measures that are effective in creating jobs and supporting employment in preparing the 2009-2010 Budget and decided to introduce in the short term more measures to strengthen the employment program.

For the medium and long term, he said, the HKSAR government would spell out measures to grasp opportunities in the Chinese mainland, consolidate strengths in financial services, promote tourism and implement infrastructure projects to help Hong Kong recover from the current financial crisis.

"Being a small open economy, Hong Kong will inevitably be hit by the once-in-a-century and the most severe financial turmoil since the Great Depression in the 1930s," he noted, "our economy will slide into recession.

He said the HKSAR government was responding with measures to ease the liquidity crunch in the financial system, relieve enterprises' financing difficulties and bolster the community's confidence.

The financial secretary promised to be responsive to social problems arising from the economic downturn, including unemployment, reduced incomes, and the negative wealth effect of lower property and stock values.

(Xinhua News Agency February 25, 2009)