The worst is over: Financial Secretary Henry Tang says Hong Kong is seeing the beginning of its economic recovery.

The worst of Hong Kong's economic downturn is over and we are now seeing the beginning of a recovery, Financial Secretary Henry Tang says.

Addressing the Federation of HK Industries' luncheon today, Mr Tang said the latest indicators point to a recovery and a steady pick-up in a number of business sectors.

Recovery is particularly noticeable in inbound tourism and related sectors such as airlines, retail, catering and business services.

He said positive signs have been seen in the Mainland, US, European and Japanese economies, and given the external nature of our economy, all of these will help Hong Kong's recovery.

"Next week, we will announce our GDP figures for the second quarter as well as the revised forecast of GDP growth for 2003. I am cautiously optimistic that we have indeed turned that corner," Mr Tang said, adding it is not realistic to expect to achieve a balanced budget in 2006-07.

"Yet, we must positively address the issue, and show that we have the determination and we have the ability to solve this problem."

Mr Tang said he understands the Central Government is considering relaxing restrictions governing the amount of cash Mainland tourists can bring into Hong Kong. Noting that all tourists are welcome to spend here, he urged them to respect their local laws on currency control.