Hong Kong's financial chief John Tsang said Wednesday in his budget speech that the city's economy grew by 5 percent in 2011, lower than the previous year's 6.8 percent, and CPI rose 5.3 percent.

Tsang said, the 5 percent economic growth in 2011 was at the lower range of the forecast that he made last August.

He said the first quarter of 2011 still saw a year-on-year growth of 7.6 percent, however, as the external environment deteriorated rapidly, Hong Kong's exports plunged, affecting the overall economy.

The economic growth slowed from 5.3 percent in the second quarter to 4.3 percent in the third quarter and further to 3 percent in the fourth.

Tsang said the city's inflation became more evident in 2011. The underlying inflation rate for the year averaged 5.3 percent, a marked rise from the 1.7 percent in 2010.

With the slowdown in local economic growth and the gradual decline in food inflation in the Chinese mainland, the rising trend in Hong Kong's inflation tapered in the fourth quarter of 2011, he said.

On the trade front, the exports of goods went down sharply in mid 2011 due to the slackening demand as a result of the unstable economic recovery in Europe and the U.S. and the worsening sovereign debt crisis in the Euro zone, Tsang said.

He said the third quarter even saw a decline year on year, the first since the fourth quarter of 2009. Exports steadied somewhat in the fourth quarter, and the growth for 2011 as a whole was 3.6 percent in real terms.

The unemployment rate dropped to a 13-year low of 3.2 percent in mid 2011, Tsang said, however, as the external environment worsened in the second half of the year, the unemployment rate rebounded slightly to 3.3 percent towards the end of 2011, which still represented full employment.