Hong Kong's economic growth is forecast to improve this year, driven by domestic demand and sustained increase in infrastructure and construction activities, Financial Secretary Paul Chan said in his 2017-18 budget speech on Wednesday.
The economy is projected to grow 2-3 percent this year compared to a moderate growth of 1.9 percent in 2016, though in line with the 1-2 percent economic growth forecast in last year's Budget.
In the fourth quarter of 2016, gross domestic product expanded 3.1 percent.
Chan noted that favorable conditions in the labor market bolstered consumer confidence in the past. Sustained growth in infrastructure and other construction activities should provide momentum for domestic demand.
But he cautioned that 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.
Further, he said inflationary pressures will remain mild in the short term. Chan forecast the headline inflation rate for this year as a whole to be 1.8 percent with an underlying inflation rate at 2 percent.
The headline inflation rate for 2016 was 2.4 percent. Netting out the effects of the government's one-off measures, the underlying inflation rate came in at 2.3 percent in 2016, the fifth consecutive year of easing.
For 2016-17, Chan forecast a budget surplus of HK$92.8 billion. Fiscal reserves are expected to reach HK$935.7 billion by March 31, 2017.
The 2016-17 estimate for the government revenue was revised up by 12 percent to HK$559.5 billion, mainly due to the increase in revenue from land sales and stamp duty.
As for government expenditure, Chan forecast a revised estimate of HK$466.7 billion, which was 4.1 percent or HK$20.2 billion lower than the original estimate.
Taking into account the challenging outlook for the tourism industry, Chan waived the one-year license fees for 1,800 travel agents and fees for over 2,000 hotels and guesthouses.
The government enhanced the old age living allowances, which would cost the government about HK$9 billion per year on average.
Chan said increasing land and housing supply remains one of the priorities of the government. The private sector will produce around 20,300 residential units each year in the next five years.
Also, the government's 2017-18 Land Sale Programme comprises a total of 28 residential sites, including 20 new sites, capable of providing about 19,000 residential units, he added.
by RTT Staff Writer
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