Hong Kong's economy could shrink in the first quarter of 2012 due to weak export markets, before rebounding to post growth of 1.0-3.0 percent over the year, the finance secretary said Wednesday.

John Tsang warned the global economy was facing a downturn worse than the 2008 financial meltdown as he released his annual budget in the southern Chinese banking centre.

Turmoil in financial markets and "unresolved economic troubles" related to the debt crisis in Europe and the United States "could deal a more serious blow to the global economy than the 2008 financial tsunami", Tsang warned.

Delivering a budget that promised stimulus spending and one-off perks, Tsang said the semi-autonomous territory would "inevitably" experience lower growth than the average of the past decade.

Exports could take a hit in the early months before recovering in the second half, he said in a speech that was interrupted by shouted protests from opposition lawmakers.

"I am not optimistic about Hong Kong's export performance in the first half of this year, and if exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter," he said.

The city's economy contracted in the second quarter of 2011 before returning to positive territory in the third quarter.

"I forecast GDP growth of one to three percent in real terms for 2012," Tsang said, adding that the economy expanded five percent in 2011.

"It is difficult to predict with any certainty the possibility of a severe recession in Europe and, if so, the precise ramifications on Asia," he said.

In his last budget ahead of March elections to select a new chief executive in the former British colony, Tsang promised HK$80 billion ($10.31 billion) in relief measures to "better prepare our people for the difficult time ahead".

He pledged to increase loan guarantees for lenders to small businesses, slash profits tax and spend more on education, including construction of a new International Cuisine College to train chefs.

Seven one-off measures included a waiver of quarterly property rates amounting to HK$11.7 billion, two months' rent relief for public housing tenants and a 75-percent cut in salaries tax to a ceiling of HK$12,000.

The salaries tax cut would inject almost HK$9 billion back into the economy, Tsang said.

Responding to complaints about a lack of affordable housing, the financial secretary said the government would continue to increase land supply despite the recent slowdown in the city's property market.

A total of 47 residential sites would be released in the financial year starting April 1, with room to accommodate an estimated 13,500 residential units.

Hong Kong home prices have soared 75 percent since the beginning of 2009 on the back of strong demand, tight supply and low interest rates. But the market softened in July with the first fall in prices in three years.

Median household income climbed 5.1 percent in real terms to HK$20,000 over the past year, meaning an "improvement in the livelihood of grass roots" residents, Tsang said.

Even so the gap between rich and poor in Hong Kong is among the largest in the world and Chief Executive Donald Tsang has identified it as one of the territory's biggest challenges.

His government has been criticised for running up large budget surpluses -- fiscal reserves stood at HK$654.9 billion on December 31, 2011 -- and clinging to a low tax regime instead of spending more to stimulate growth, boost employment and improve social services.

The government says surpluses are required to prepare for an ageing population and guard against an uncertain global outlook.

Hong Kong Taxation Institute Vice-President Godwin Ng described the budget as a "good effort" but said there should have been more long-term solutions instead of one-off hand-outs.

"Hong Kong people will benefit from the string of measures like tax reductions and the waiving of two months rent for public housing. But in the long run, there are no promises," he said.