The economy of Hong Kong is in a healthy state and the growth will reach 5 per cent this year, Financial Secretary Henry Tang told the Legislative Council yesterday.

He was speaking at the start of consultations about next year's budget. Tang also said inflation is expected to be mild at about 2 per cent compared with the robust economic growth over the past two years.

Addressing the LegCo Panel on Financial Affairs on the background of the 2007-08 Budget, Tang said economic growth in the first six months was 6.6 per cent, indicating the 11th consecutive quarter in which the GDP growth exceeded the trend growth of 3.9 per cent over the past 10 years.

"It is a good thing to have a mild growth like this," he told the panel. "For if a mature economy like Hong Kong is growing fast continuously, it will become subject to the pressure of inflation and so it will be healthier if economic growth is close to the trend growth of 4 per cent," Tang said.

Responding to a legislator's question on if Tang would work out a budget for a shorter period, since his term would expire in June 2007, Tang said he would compile a 12-month budget for 2007-08, with a medium range forecast for the four subsequent years.

"I cannot come up with a budget that is good for three months only, for it makes no sense for the new-term government which will be formed on July 1, 2007 to present another budget to (LegCo) for approval.

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