Economists believe the economic momentum is sustainable in 2004. The government has forecast that GDP growth will leap further to 4 per cent while some economists expect an even better performance of 6 per cent. Giving one of the most bullish outlooks, investment house CLSA has forecast real growth of 9 per cent in 2004.

Chief Executive Tung Chee Hwa said Hong Kong is seeing positive signs of recovery.

"Our exports are recording double-digit growth. There has been a noticeable upturn in the services sector. Unemployment is edging downwards. The stock market is buoyant. Property prices are edging up. GDP growth rose robustly by 4 per cent in real terms in the third quarter of the year. These are very positive developments."

The economy has clearly been picking up in the second half of 2003 after Hong Kong's economic activities, most notably travel, tourism and trade, were dampened by the outbreak of the Severe Acute Respiratory Syndrome (Sars) and the Iraq war in the first half to mid year.

Cepa and tourism surge contribute to rosy outlook

Much of the rosy outlook in the third quarter was the result of the free trade deal signed between Hong Kong and the Chinese mainland, the Closer Economic Partnership Agreement (Cepa) and the robust pick up in global economy.

At the signing ceremony, China's Vice Minister of Commerce An Min and Hong Kong's Financial Secretary Henry Tang said Cepa would bring more business opportunities to Hong Kong, mainland and overseas companies and that there would be more concessions to come. Mr An said: "Cepa is an open and continuous agreement and there will be new developments."

Cepa takes effect on 1 January 2004. More details on What is Cepa - a simple guide.

Domestic confidence is also on the upswing helped in part by a surge in tourism from Chinese mainland visitors who are expected to spend HK$59 billion in Hong Kong in 2004 - HK$20 billion more than this year and equal to 2 per cent of Hong Kong's GDP, according to a recent survey by CLSA.

The CLSA report also expects at least 12 million mainlanders to visit Hong Kong in 2004 - 20 per cent more than this year's estimated 10 million.

Hong Kong International Airport was a major beneficiary posting a monthly record of 267,000 tonnes in November. Cargo tonnage grew 5.8 per cent compared with last November, mainly driven by export growth of 7 per cent in major markets of the Chinese mainland and Europe.

Concluding the year on a bright note, Financial Secretary Henry Tang, said: "2003 is no doubt a roller-coaster year for Hong Kong. I am cautiously optimistic that Hong Kong's economy has turned the corner, and our budding growth is gaining strong momentum."