Hong Kong's economy is set to undergo weak expansion in 2012 due to deteriorating global conditions, Financial Secretary John Tsang said in his budget speech on Wednesday. In a bid to please lower income group, Tsang announced tax rebates and subsidies.
The Hong Kong economy grew only 3 percent year-on-year in the fourth quarter, as exports plunged due to the weak external environment, affecting the overall economy. The third quarter growth was 4.3 percent, according to the 2012-13 budget.
As growth eased since the start of 2011, overall GDP growth reached just 5 percent for the whole year, unchanged from the government's earlier estimate.
"I shall introduce measures worth nearly $80 billion in this year's Budget to better prepare our people for the difficult time ahead," he said. He forecasts GDP growth of 1 percent to 3 percent in real terms for 2012.
The average underlying inflation rate for the year is expected to drop to 4 percent this year from 5.3 percent in 2011. The headline inflation rate for 2012 is estimated at 3.5 percent after accounting for the effects of the one-off measures that are to be implemented.
The government announced a personal income tax rebate of up to 75 percent for 2011-12, subject to a ceiling of HK$12,000. This would benefit 1.5 million taxpayers, but would cost the government HK$8.9 billion.
Further, the government plans to grant a subsidy of HK$1,800 for each residential electricity account. This will cost the government HK$4.5 billion. This announcement is expected to help 2.5 million households.
He said the government will continue to increase land supply in the coming year despite a slowdown in the property market. The government will include 47 residential sites on the land auction application list for the financial year starting April 1. This will provide some 13,500 residential units, he said.
Around 30,000 private residential units are likely to be out in the market in the coming year, Tsang estimates.
Tsang also announced plans to launch another round of inflation-linked bonds to promote the sustainable development of the retail bond market. It will issue the so called iBond worth not more than HK$10 billion under the Government Bond Programme.
The government surplus is seen at HK$66.7 billion, equivalent to 3.5 percent of GDP in 2011-12. Tsang said the accounts will post small deficits in the coming years, but will largely achieve fiscal balance.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.