Consensus call: Chief Executive Donald Tsang speaks at the Legislative Council question-and-answer session.

Chief Executive Donald Tsang is cautiously optimistic about Hong Kong's economic outlook for the year, adding the Government will consider measures to further help the needy.

Attending the Legislative Council question-and-answer session today Mr Tsang said while the local economy has seen a recovery in recent months with strong retail performance, exports returning to growth and an improving job market, the city's economy remains sensitive to external factors.

"The global economy remains unsteady. Developed economies are still facing many downside risks. As such, the recovery in Hong Kong may still be capricious," Mr Tsang said, adding the timing of an exit from stimulus strategies by various governments and central banks has added substantial uncertainty to economic prospects around the world and in Hong Kong.

"European and American central banks are now paving the way for an exit and we will keep a close watch on developments. After the stimulus exit begins there will be a drop in liquidity in the financial market and a rise in interest rates. This may add to the fluctuation of US dollar exchange rates and pose a new challenge to a steady economic recovery."

Economic transformation

Mr Tsang clarified with lawmakers that during his duty visit to Beijing last month, Premier Wen Jiabao's remarks about "deep-rooted conflicts in Hong Kong" was referring to the city's economic transformation.

"We have started work on this front, including proposing the development of six industries in which Hong Kong has an advantage, promoting the diversity of our economic structure and avoiding over-reliance on the financial services industry. Concrete plans will be rolled out one-by-one this year."

Saying Hong Kong also faces many other deep-rooted conflicts, including political and social ones, Mr Tsang said improving people's livelihood has been his primary task.

"I promise the Government will actively consider measures to relieve the plight of low-income earners. Promoting economic development and creating more jobs are the highest of priorities in the Government."

Political development

On the constitutional reform consultation, Mr Tsang said there are no quick fixes for the community debate which has already lasted 25 years and seen a polarised society at times.

"It is the Government's responsibility to narrow down differences progressively and forge common ground, then overcome difficulties step by step in achieving the goal of universal suffrage," he said, adding the present public consensus is people do not want anther stalemate in constitutional development.

He said mainstream views do not back plans by some political parties' to force a referendum. The Basic Law does not provide a system of referendum in Hong Kong, so a referendum in any form would have no legal basis and would not be recognised by the Government. Any move departing from the procedures as prescribed in the Basic Law will not help the community forge a consensus.

Young generation

Noting recent concern about the dissatisfaction of people born in the 1980s, Mr Tsang agreed today's youth strive for values and self-fulfilment, and the community should rethink whether its communication with the younger generation has been sufficient.

"We do need to learn more about our young people, to listen to them and understand their ideas and aspirations, and their expectations of the community and the Government. We need to [understand] their disappointment and dissatisfaction too."

Mr Tsang said the work direction of his government focuses on easing conflict and balancing different interests.

"We do not blindly pursue development at all costs, nor do we strive for conservation at the expense of development. We cherish young people's devotion to Hong Kong, and if this devotion is applied to social building it will help promote sustainable progress in the city."