THE Hong Kong economy began the year on a strong note, with the Gross Domestic Product (GDP) increasing by 4.5 per cent in real terms in the first quarter over a year earlier. Growth in the second quarter was abruptly derailed by the spread of Severe Acute Respiratory Syndrome (SARS), with GDP relapsing to a 0.5 per cent decline. Nevertheless, economic activity soon staged a broad-based recovery in the third quarter after the waning of SARS, and the upswing was sustained well into the fourth quarter upon a further lift in local sentiment. Reflecting this, GDP bounced up strongly to 4.0 per cent and 5.0 per cent growth respectively in these two quarters. Thus, even with the severe setback caused by SARS earlier in the year, the Hong Kong economy still attained an appreciable growth of 3.3 per cent in real terms for 2003 as a whole, which compared favourably with that of 2.3 per cent in 2002. On a seasonally adjusted quarter-to-quarter comparison, GDP shrank by 0.5 per cent and 2.6 per cent respectively in real terms in the first and second quarters of 2003, but reverted to increases by 6.6 per cent in the third quarter and 1.5 per cent in the fourth quarter.