Thu, Feb 27, 2014 - Page 15 News List

Fastest growth in three years predicted for Hong Kong

Bloomberg

Demonstrators hold candies marked with requests for better housing policy, low inflation and better transportation outside government offices in Hong Kong yesterday ahead of Hong Kong Financial Secretary John Tsang’s annual budget speech.

Photo: AFP

Hong Kong’s economy is set to expand at the fastest pace in three years, even as the winding back of US monetary stimulus adds to the risk of volatility in capital flows, the government said.

Growth may be between 3 percent and 4 percent, Hong Kong Financial Secretary John Tsang (曾俊華) said in his budget speech yesterday, after a 2.9 percent expansion last year.

GDP rose 1.1 percent in the fourth quarter from the previous three months, the fastest pace in a year and matching the median estimate in a Bloomberg News survey of economists.

While Hong Kong also faces the risks associated with a slowdown in China, Tsang has indicated that it is time to shift away from a crisis mentality and to focus more on longer-term policies.

In the budget for the coming year, one-off assistance for citizens such as tax cuts and welfare payments totaled about HK$20 billion (US$2.6 billion) down from HK$33 billion in the previous document.

“The growth forecast of 3 percent to 4 percent is achievable due to a robust domestic demand and a pickup in investment,” Hang Seng Bank Ltd (恒生銀行) economist Ryan Lam said in Hong Kong.

Hong Kong’s economy grew 1.5 percent in 2012, down from the 4.8 percent pace in 2011 and a 6.8 percent expansion in 2010, when the territory was surging back from the global financial crisis, Bloomberg data showed.

Yesterday’s package included one-off measures such as property-rate waivers, tax cuts and social-security payments.

The US Federal Reserve said in December last year that it would start reducing the monthly pace of its asset purchases, citing progress toward its goal of full employment. It announced a US$10 billion reduction that month, followed by a cut of the same size last month, to US$65 billion.

Fed Chair Janet Yellen this month pledged to scale back stimulus in “measured steps.”

While Tsang yesterday described the Chinese economy as “robust,” investors are focused on credit-market stresses including the risk of defaults by high-yield trust products.

Hong Kong’s Hang Seng Index has fallen about 4 percent this year, amid concern that China’s slowdown will deepen. The gauge was up 0.2 percent yesterday as of the morning break in trading.

“The slowdown in China’s growth will impact Hong Kong’s economy,” Lily Lo, a Hong Kong-based economist at DBS Group Holdings Ltd, said before yesterday’s data and budget speech.

Barring external shocks, Hong Kong can maintain full employment this year, Tsang said, adding that tourism and infrastructure projects will help to fuel domestic consumption.

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