The Gross Domestic Product (GDP) of Hong Kong fell by 2.7 percent in 2009, Hong Kong's financial chief John Tsang said Wednesday when delivering the budget proposals for the fiscal year of 2010-2011 in the Legislative Council.

In the first quarter of 2009, Hong Kong's GDP plunged 7.5 percent as the global financial crisis was running deep. However, as the Chinese mainland economy returned to faster growth and the European and the U.S. economies began to stabilize, economic growth in Hong Kong improved in the second quarter and resumed year-on-year growth of 2.6 percent in the fourth quarter, Tsang told legislators.

Amidst the severe plunge in global trade, Hong Kong's goods exports fell by 12.6 percent in real terms in 2009, the biggest annual drop on record.

For investment, gross domestic fixed capital formation dipped by 2.2 percent for the whole year.

In spite of these drops, the consumer sentiment was not seriously affected for most of the year and the business sentiment also improved distinctly during the latter half of the year, with overall investment recording double-digit growth in the fourth quarter, Tsang said.

He noted the biggest concern for the government is employment.

"As the economy started to recover and our measures to preserve employment proved effective, employment conditions turned better from the middle of last year, with unemployment rate coming down to 4.9 percent lately," he said.

The average inflation rate for 2009 as measured by the Composite Consumer Price Index was 0.5 percent. Netting out the effects of the government's one-off relief measures, the underlying inflation rate was one percent.