(RTTNews) - The International Monetary Fund’s staff mission on Tuesday raised Hong Kong’s GDP forecasts for 2009 and 2010, as many of its economic indicators remained positive.

The lender expects the city economy to contract 2% this year, but post a 5% growth next year. In its World Economic Outlook released in October, IMF had forecast a 3.6% contraction for 2009 and 3.5% growth for next year. The assessment was made in the Preliminary Conclusions of the IMF Mission, following the 2009 Article IV consultation discussions.

“The financial pressures experienced by Hong Kong SAR following the failure of Lehman Brothers began to recede in the latter part of 2008 due to the proactive and concerted policy efforts of the government and the improving situation in global capital markets”, the IMF said. “The recovery is now underway, fueled by growth in China, stimulative fiscal policies, the government’s efforts to support smaller enterprises and preserve employment, and highly accommodative monetary conditions imported from the United States.”

The global lender expects Hong Kong’s jobless rate to decline in coming months. Moreover, the IMF said price pressures would be muted, and expects the consumer price inflation to end close to zero in 2010. The organization expects the contribution to growth from external demand to remain weak, despite strong performance in the Mainland.

Commenting on the IMF report, Hong Kong’s Financial Secretary John Tsang said, “We welcome the Mission’s fair and balanced assessment of Hong Kong’s overall economic situation. We will continue to pursue the strategy of ’stabilizing the financial system, supporting enterprises and preserving employment’ until the recovery is firmly in place.”

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