Hong Kong yesterday unveiled a less expansionary budget for fiscal year 2019-2020, though with relief measures for individuals and businesses at a time of economic uncertainty and trade tensions as growth slowed sharply.
Hong Kong Financial Secretary Paul Chan (陳茂波) said that annual growth halved in the fourth quarter last year, and the outlook for the territory is clouded by a trade dispute between Washington and Beijing.
Hong Kong’s open and trade-reliant economy has been buffeted by external risks, including an economic slowdown in China, cooling property prices and stock market volatility.
The economy grew 1.3 percent in the fourth quarter from a year earlier, the weakest increase since the first quarter of 2016, and slower than downwardly revised 2.8 percent growth in the previous three months, Chan said.
The economy grew 3 percent for the full year, slightly slower than the government’s forecast of 3.2 percent.
ING Group Greater China economist Iris Pang (彭藹嬈) said in a report that the weaker than expected growth was due to a spillover from the US-China trade dispute.
“This was mainly a result of the trade war, which dampened export activities and related jobs in Hong Kong, and on the mainland, with negative feedback into consumption in Hong Kong,” Pang said.
The trade-reliant economy is forecast to expand between 2 and 3 percent this year, and average 3 percent growth from next year to 2023, Chan said in his televised budget speech.
Hong Kong is expected to record a budget surplus of HK$58.7 billion (US$7.48 billion) for 2018-2019, Chan said, less than half the bumper surplus of HK$148.9 billion announced for the previous financial year.
Hong Kong’s economy is vulnerable to simmering trade tensions between the world’s two largest economies and, if unresolved, they pose broader risks to the territory this year.
As one of the most open and free economies in the world, Hong Kong’s growth is also highly reliant on capital, trade, tourist and investment flows from China.
Chan’s budget this year was less expansionary than last year with fewer big ticket expenditures, though there were a mix of relief measures for individuals and businesses.
Business registration fees were waived for companies this year and greater funding options would be provided to help those facing liquidity difficulties. Some business sectors, including film, would also be injected with fresh funds to preserve heritage.
Tax cuts were pared back slightly from the year before, with a 75 percent cut in salaries and profits tax, both capped at HK$20,000.
However, Chan increased spending on the territory’s strained public hospitals with an extra HK$5 billion allocated and healthcare coupons for elderly residents.
On the frothy property market, now one of the most expensive in the world, Chan said the government has “no intention to withdraw” existing cooling measures, despite a recent easing back of property prices.
Some analysts predict prices could rise as much as 10 percent this year after only a short-lived correction.
However, property owners were given a one-off full-year waiver of property rates, as an alleviation measure, reducing government revenue by HK$15 billion.
Chan also called a development plan for the Guangdong-Hong Kong-Macau Greater Bay Area as a “milestone” that would bring “golden opportunities for Hong Kong to explore new directions, open up new horizons and add new impetus.”
The government also announced HK$6 billion to enhance the territory’s famous Victoria Harbour, by nearly doubling the length of waterfront promenades to 34km by 2029.
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