Hong Kong Government has announced on Wednesday (22 February) that it will hand out billions of dollars in tax cuts and poverty relief yesterday to reflate its economy and projected a brighter outlook this year amid growing concerns over rising trade protectionism and higher interest rates.
The city government bumped up its economic forecast for 2017 by a full percentage point to 2-3 percent, adding that the economy grew, faster than expected by economists, at 1.9 percent last year.
It also stated that its trade-reliant economy is carrying more momentum in the new year due to a pickup in exports and private consumption, and a more stable Chinese mainland economy, helping boost annual growth to 3.1 percent in the final quarter of 2016.
Financial Secretary Paul Chan said in his maiden budget address that there is an improvement in labor market and construction projects worth nearly HK$87 billion (SGD$15.8 billion) this year.
He said that this occurrence also bolstered consumer confidence that would feed into the local economy.
However, he notes that the city’s astronomical property prices continues to be an issue, saying, "The uncertain external environment and interest rate trend may trigger abrupt shifts in capital flows and heighten volatility in local asset prices, with repercussions on consumption and investment sentiments and on macro-economic stability."
Chan called property market as exuberant and "out of tune with the local economy" despite a raft of cooling measures. He stressed that the government would "substantially" increase residential flat supply in the next few years.
Hong Kong's provisional budget surplus was a much higher than expected HK$92.8 billion (S$16.97 billion) for the 2016/17 financial year.
This is far in excess of the HK$11 billion (SGD$2 billion) last year, with fiscal reserves of HK$935.7 billion (SGD$170.2 billion).
The government has also announced that some HK$61 billion (SGD$11.1 billion) would be ploughed into elderly services, sports development, youth development and developing the high technology sector.
The Financial Secretary said that Hong Kong could afford to be more proactive with its spending and his measures to "share the fruits of economic development" would help stimulate domestic demand, stabilise the economy and help the job market.