Hong Kong will spend nearly HK$80 billion (US$10.3 billion) to bolster growth as the government forecasts the weakest expansion since 2009 on a “bleak” outlook for the US and Europe.
GDP could rise between 1 percent and 3 percent this year, down from an expansion of 5 percent last year, Hong Kong Financial Secretary John Tsang (曾俊華) said yesterday in his budget speech. The measures include infrastructure spending, property-rate waivers and tax benefits, he said.
Tsang, delivering his last budget, said “the risk of a sharp deterioration of the external environment is increasing.” Property prices in the city, the world’s most expensive place to own a home, have slid 6 percent since June last year, and banks and brokerages including HSBC Holdings PLC and Samsung Securities Co are trimming staff.
“The budget measures should help to buffer local household spending from the impact of slower global growth, as the European crisis threatens to spill over to affect business sentiment in the US and Asia,” said Donna Kwok (郭浩庄), an economist at HSBC Holdings PLC in Hong Kong.
“Policy makers across Asia will come under increasing pressure to loosen the fiscal spigots or monetary conditions to support growth,” she added.
The economy grew 0.3 percent in the fourth quarter of last year from the previous three months, according to the government. On a yearly basis, the expansion was 3 percent, less than the 3.1 percent median forecast in a Bloomberg News survey of 12 economists.
“I am not optimistic about Hong Kong’s export performance in the first half of this year,” Tsang said yesterday. “If exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter.”
Unemployment could climb this year, the financial secretary said. DBS Bank Hong Kong Ltd expects the jobless rate to reach 4.4 percent by the end of this year, up from 3.3 percent in the fourth quarter of last year.
Inflation is likely to slow to 3.5 percent this year, compared to 5.3 percent last year, Tsang said. Hong Kong will issue up to HK$10 billion of three-year inflation-linked bonds, after its first sale in July last year, to help residents cope with rising prices, he said.
Tsang said he saw “bleak economic prospects” for Europe and the US.
Like China, Hong Kong has a property market that is cooling because of government curbs, with Barclays Capital predicting prices could fall as much as 25 percent by next year.
The Hang Seng Property Index, which tracks the territory’s seven biggest developers including Sun Hung Kai Properties Ltd. (新鴻基地產) and billionaire Li Kashing’s (李嘉誠) Cheung Kong Holdings Ltd (長江實業), fell 24 percent last year, after gaining more than 75 percent over the previous two years.
Ahead of yesterday’s data, UBS AG said it saw Hong Kong’s economy expanding 1.6 percent this year, with the possibility of a “shallow” recession in the first half of this year, while Standard Chartered PLC predicted growth of 2.9 percent.