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Hong Kong sees 'modest growth' for 2013

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(Globalpost/GlobalPost)

Hong Kong's economy is expected to see "modest" growth this year owing to tepid exports, the city's finance chief said Wednesday as he delivered a budget aimed at taming soaring property prices.

John Tsang warned 2013 will remain a challenging year due to the slow pace of recovery in the United States, the ongoing debt crisis in Europe and the uncertainty surrounding Japan's stimulus measures.

But he cited strong domestic demand, an uptick in construction and tourism, and the mainland's return to strong growth momentum as boons to the city as it seeks to return to the 4.5 percent growth average seen over the past 10 years.

"The whole world will have to face wars on three fronts, namely 'currency', 'trade' and 'geopolitics'. As a highly open and small economy, Hong Kong will be impacted by the development of these wars to a certain extent.

"I expect a modest improvement in our economy this year and forecast GDP growth of 1.5 to 3.5 per cent for the year... there may be some upward pressure on the unemployment rate," he added.

GDP growth for 2012 meanwhile was "only" 1.4 percent, Tsang said as exports remained weak in the first half of the year.

In the first budget under Chief Executive Leung Chun-ying, and Tsang's sixth overall, the finance secretary announced measures aimed at alleviating poverty, helping the elderly and taming the soaring housing market.

These included a 31 percent increase on social welfare spending, to HK$56 billion ($7.2 billion), which includes subsidies for residential care for the elderly and services for the disabled.

He also vowed to increase land-supply to tamper property prices which have doubled since 2009, squeezing average citizens. "The government's aim is to maintain on average the provision of land for building about 20,000 residential units each year," he said.

Tsang said he had had been listening to the concerns of the middle class, who are under a heavy burden to cope with rent, medical care, and supporting their parents and children.

"I agree that middle-class families should be given some support. However, as one may appreciate, it is impracticable for the government to respond to each and every demand," he said.

One-off measures included a waiver of quarterly property rates amounting to HK$11.6 billion and covering 75 percent of properties, and a 75-percent cut in salaries tax to a ceiling of HK$10,000.

The salaries tax cut alone would inject some HK$8.4 billion back into the economy, Tsang said.

But the measures were not enough to placate protesters and some lawmakers who are angered by an ever-widening wealth gap and who want the government to spend more on welfare instead of clinging to a low-tax regime and running up surpluses -- estimated at HK$64.9 billion for 2012-13.

Dozens of people, some dressed as the Chinese "wealth god", waved banners and shouted slogans outside government headquarters demanding cash handouts of HK$10,000 and more welfare spending.

"The government should give money directly to the general public so that they could make the ends meet," activist Tam Kwok-kiu told AFP, adding that the government is sitting on a fiscal surplus.

Two radical lawmakers including the famous Leung Kwok-hung were escorted out of the chambers after interrupting Tsang's speech and calling him a "liar".

ia-at/dan

http://www.globalpost.com/dispatch/news/afp/130227/hong-kong-sees-modest-growth-2013