Real GDP growth in 2003 is projected to slip to 0.8% from 2.3% last year.

This is the prediction of the Pacific Economic Outlook 2003-2004, an annual forecast of economic growth in the Pacific region by the Pacific Economic Co-operation Council.

The outlook's Hong Kong forecaster, Hang Seng Bank Chief Economist Vincent Kwan, said the SARS outbreak interrupted many of our economic activities, such as inward and outward travel, entertainment, retail sales and conferences and trade fairs.

As it might take at least six months for the number of visitors to return to pre-SARS levels, the repercussions on domestic demand and unemployment will be significant.

Hong Kong's re-exports and offshore trade is expected to be underpinned by the Mainland's thriving exports, and Mr Kwan said total exports are likely to grow by 9.4% in real terms this year.

In 2004, the real GDP growth is likely to remain at a sub-par level of 2.5% with deflation at 1%, he said.

Mr Kwan said sustained growth at a faster pace can take place only when domestic demand regains momentum, which will come with enhancing the provision of services to Mainland enterprises and individuals.

The full forecast report can be downloaded here.