Hong Kong's unemployment rate may go up in the coming quarters following the recent turmoil in financial markets, the government said on Friday.

"It will be a more difficult year in 2009," Financial Secretary John Tsang said in a media session after a briefing with Legislative Council (LegCo) members and LegCo members-elect in the afternoon.

Employers will be more cautious in hiring staff in an economic slowdown, Tsang said. The latest figures were reported on Thursday. The jobless rate was 3.2 percent for June to August, and the underemployment rate was 1.9 percent, the same as in May to July.

"Some of the 10 large-scale infrastructure projects included in last year's policy address are already pushing ahead," Tsang said, adding that the development should be able to provide more job opportunities in the city.

Tsang said that Hong Kong is a highly externally-oriented economy as well as a major international financial center. "We will inevitably be affected by the turmoil in the short term," he said.

The government, however, will adhere to the economic growth forecast at between 4 percent and 5 percent. The government has already taken into account a slowdown in the economy toward the second half of 2008, he said.

However, Hang Seng Bank has already revised down the 2008 economic growth forecast to 4.3 percent from 5 percent last month, JPMorgan's forecast down to 4 percent from 4.8 percent and DBS Bank also revised to 4.2 percent from 4.7 percent.

"The slowdown will also affect directly the government revenue. This will greatly limit the room for maneuver when drafting the next budget," Tsang said.

He declined to comment if the government will cut the budget to provide relief under the inflationary pressure. "We still have few months, and we have to consider the overall income and expenses of the government," Tsang said.

The deteriorating economic condition in the second half has already been taken into consideration, Tsang added.

He also emphasized that the prevailing state of the financial markets is a result of a global economic crisis and the city's regulatory system cannot be blamed.

Representatives from the city's regulators, including the Hong Kong Monetary Authority, the Securities and Futures Commission and the Office of the Commissioner of Insurance, joined yesterday's meeting with the LegCo.

Tsang said all major financial centers in the world will continue trying to perfect their regulatory framework in light of the lessons they learned. "Under the present circumstances, investors would inevitably be affected," he added.

(HK Edition 09/20/2008 page2)