HONG KONG - HONG Kong could adopt a further economic stimulus package later this year to counter the impact of the global financial downturn, chief executive Donald Tsang told Monday's Financial Times.

He said the territory was facing its most serious economic test since World War II but was in a position to weather the storm.

Hong Kong is a key transit hub for goods made in southern China's factory belt, but exports through here fell almost a quarter year-on-year in February on the back of a slump in demand from the United States and Europe.

Mr Tsang said the city had HK$400 billion (S$77.4 billion) in the bank 'so I'm in a good position to spend more if I want to... If necessary we will do something in the middle of the year.'

While Hong Kong has generally capped government spending at 18 per cent of gross domestic product, Mr Tsang said it was difficult to make a major impact on the wider economy.

'Fortunately I've still got a lot of ammunition in my pocket,' he told the business daily.

Mr Tsang's comments echo those of his namesake, Hong Kong financial secretary John Tsang, who cautioned last month that the global slowdown would get worse before it got better.

Mr John Tsang, who had refused to make huge spending promises in his February budget, said he would wait until the middle of the year to gain a better grasp of how the economy is going to play out.

Hong Kong slipped into recession in the third quarter of last year, a sharp contrast to the China-inspired boom over the past four years.

The government expects the economy to shrink between two and three percent in 2009, as the city's key sectors - exports, finance and property - continue to struggle through the downturn. -- AFP