Officials have boasted for months that Hong Kong was different from the rest of Asia and played down the setbacks on its stock market last year.

But the administration of China-appointed chief executive Tung Chee-hwa now admits that the Asian wolf is at Hong Kong's door and a prolonged period of hard times lies ahead.

"Wake up and smell the coffee, Tung. The troubles in your economy didn't happen overnight, they have been brewing for months," wrote South China Morning Post columnist KL Law today.

In announcing a 2.0 per cent contraction in Gross Domestic Product in the first quarter of this year, Tung bluntly said that the fall had caught his government by surprise.

Economists will scramble over the next week to mark down their estimates for second quarter GDP, covering April-June, and their growth estimates for 1998.Many economistssaid after Friday's grim GDP figure that Hong Kong looked set for two consecutive quarters of negative growth -- the common definition of a recession.

That would be the first time GDP has contracted for two quarters running since 1985, shortly after Britain agreed to hand over its rich South China colony to communist China in July 1997.

Economists said they would also mark down their estimates for annual growth, which the government forecasts at 3.5 per cent. Tung has acknowledged this is now unattainable.

Tung has appeared to adopt a policy of benign neglect for much of his tenure, while unemployment soared to the highest levels in 14 years and property prices, where many Hong Kong residents are invested, plummeted.

On Friday, Tung, perhaps pressured by a strong showing by opposition pro-democracy parties in this month's legislative elections, announced a seven-step programme to address Hong Kong's economic woes.

Economists and political commentators hailed the effort but said it was unlikely tochange the economic outlook for some time to come.

There were some quick, albeit limited, positive signs with hundreds of home buyers and speculators rushing to the sale of a residential development in Tsing Yi district over the weekend.

The stampede was sparked by one of Tung's new measures which lifted anti-speculation rules imposed on the red-hot property market last year.

Cheung Kong (Holdings) Ltd said some 1,200 units offered in its Tierra Verde residential project had been snapped up in the first day.

The government measures also included boosting liquidity and easing travel restrictions on Taiwan and China visitors to help Hong Kong's ailing tourism.Tung said on Friday his priority was to stabilise property prices, which have plunged 40 per cent since peaking in October last year.

Analysts said further price declines could put pressure on homeowners who are servicing big mortgages and who have seen their asset values crash. That, in turn, could put pressure on bank balance sheets.

Theweekend flat-buying frenzy was largely applauded by the government."Judging from the present market situation, curbing speculation is not our priority. Rather, the most important thing is to stabilise flat prices," said financial services secretary Rafael Hui.

However, analysts said the government's initiatives would not see a quick turnaround in the economy.

"We are talking about a very big crisis here -- and the government is talking about (building) a cable car to Ngong Ping (on nearby Lantau Island)," said professor Richard Ho, dean of business faculty at City University.

And the good news of some renewed interest in the property market was offset by Hong Kong flag carrier Cathay Pacific Airways Ltd saying it would trim its staff by a further five to seven per cent through attrition and a hiring freeze.

The airline, which has about 15,000 staff, laid off 760 staff in January.