Hong Kong's economy is expected to achieve solid growth in 2005, with GDP forecast to grow by 4.5 to 5.5 percent, said Hong Kong's Financial Secretary Henry Tang on Wednesday.

Tang told the Legislative Council when presenting the 2005-2006 government budget that since 2004, Hong Kong's economy has been staging a broader-based recovery. With the continued economic development of the mainland and the closer economic ties between it and Hong Kong, Hong Kong economy is expected to maintain steady growth over the next four years, Tang said.

The trend GDP growth rate in real terms from 2006 to 2009 is forecast at 4 percent. With deflation coming to an end, the trend rate of increase in the GDP deflator is forecast at 1.5 percent. After combining these two forecasts, the trend growth rate of nominal GDP over the period from 2006 to 2009 is forecast at 5.5 percent, Tang said.

With a further pick-up in the economy and the development and implementation of various tourism and infrastructure projects, overall employment opportunities look set to increase further, and the unemployment situation in Hong Kong will continue to improve, Tang said.

Inflation will remain modest, with the Composite Consumer Price Index expected to rise by a mere 1.5 percent for 2005, Tang said.

Hong Kong's external trade is again expected to perform strongly in 2005, as the earlier weakness of the US dollar will still be advantageous to Hong Kong's export competitiveness in the short term, and as the global economic outlook is promising, Tang said.

With the opening of Hong Kong Disneyland, inbound tourism will continue to thrive. Private consumption expenditure should advance further, buoyed by improved employment income and positive developments in the asset markets. The robust overall demand for goods and services will in turn induce new investment expenditure, Tang said

"Although Hong Kong's economy is expected to maintain solid growth this year, we still have to be alert to certain risks and variables such as oil prices, US dollar exchange and interest rates, geopolitical uncertainties, and whether the global and Asian economies can maintain their anticipated steady growth this year," Tang added.