Hong Kong's economy is expected to achieve a solid growth in 2006, with GDP forecast to increase by 4 to 5 percent, slightly higher than the trend growth rate over the past 10 years, Financial Secretary Henry Tang said Wednesday.

In the medium term from 2007 to 2010, he forecast a 4 percent trend GDP growth rate in real terms, and a 2 percent trend rate of increase in the GDP deflator. The forecast trend growth rate of nominal GDP over the period from 2007 to 2010 is therefore 6 percent, Tang said.

He made the remarks while presenting the 2006-2007 government budget to the Legislative Council.

He said the external environment should remain generally positive this year. Following the macroeconomics adjustment, the Chinese mainland economy continues to grow strongly on a firmer footing. The U.S. economy has in recent years maintained steady growth. European economies have been clouded for several years by negative sentiment but have shown signs of improvement recently. The Japanese economy has gradually regained its vitality after emerging from a prolonged downturn.

Taking all these factors into account, and subject to there being no serious incidents or major external shocks, Hong Kong's economy is expected to achieve solid growth in 2006, Tang said.

However, the full impact on the global economic climate of increased oil prices and successive interest rate hikes has yet to be felt, he said. Higher interest rates may also crimp the growth in local private consumption and investment expenditure. In addition, heightened geo-political tensions in certain parts of the world may also lead to further volatility in oil prices and financial markets.

Source: Xinhua