Standard Chartered Bank maintains that the worst fiscal time is yet to come, and it is likely to arrive during the first and second quarters of next year. The bank has further lowered its prediction on Hong Kong's real growth this year and next as damage to economy worsens.

"The worst time certainly is not yet over," said Kelvin Lau, a regional economist at Standard Chartered. "We hope it will come on the first and second quarters in 2009, or maybe in the third quarter."

From an economic perspective, it will take some time for the market to reflect on the actual damage to the economy, since the latest sign of US consumers tightening their spending was just revealed, Lau said.

Amid the global financial turmoil, consumer spending in Hong Kong is affected due to lack of confidence in the market and people tending to be more cautious toward spending, in both private consumption and investments, and it is not certain for how long this situation remains.

As Lau said, 2009 will be a critical year.

Standard Chartered has lowered its forecast for Hong Kong's whole year GDP growth to 3.7 percent in 2008 and sharply down to 2.3 percent for 2009, year-on-year.

A month ago, the bank estimated the growth would be 4.6 percent in 2008 and 5 percent in 2009, year-on-year.

The bank has also lowered its forecast for mainland's GDP growth in the coming two years due to shrinking exports to overseas markets. The GDP rates were forecasted to be 7.9 and 7.1 percent in 2009 and 2010.

According Lau, the adjustment in forecast was made before the Hong Kong Monetary Authority issued its rescue plan to stabilize the financial market, and he said the policies will help restore confidence in the market, but added that they won't put an end to the economic slowdown.

Regarding what the government can do to boost domestic spending, Lau said: "I think it has to rely on what the central government does".

However, Lau said the Hong Kong SAR government has already done enough to secure investors' confidence in the market, including insuring all bank deposits and setting up money reserves for banks.

"There is no need for further immediate actions for now." Lau said.

(HK Edition 10/17/2008 page2)