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Wednesday, February 24, 2016, 14:23

Tsang predicts GDP growth rate 1-2% in 2016

Tsang predicts GDP growth rate 1-2% in 2016
Hong Kong's Financial Secretary John Tsang delivers the budget speech at the Legislative Council on Feb 24, 2016. (Roy Liu / China Daily)

HONG KONG - Hong Kong's Financial Secretary John Tsang announced HK$38.8 billion in relief measures, including reductions in salaries tax, government rent waivers, additional social service disbursals and subsidies as he began his Budget speech ruing the Lunar New Year violence on Feb 9.

In the preamble to his ninth budget address as Financial Secretary, Tsang said he was profoundly impressed by the tenacity of the Hong Kong people during trying economic times but perplexed over the violence hatched by irrational protesters Feb 9, shocked that the city could become such an alien place in just one night.

Tsang noted the close relations between politics and the economy, forecasting growing political disputes given the Legco by-election this weekend and the legislature’s general election in six months’ time.

Tsang predicts GDP growth rate 1-2% in 2016
Graphic: Hong Kong Government

GDP lag

Tsang struck a pessimistic note in his annual budget address, predicting GDP growth for the coming year at between only one and two percent.

He announced that Hong Kong witnessed an overall economic growth of 2.4 percent last year. It is the fourth year in a row that Hong Kong's economic growth was lower than the annual average of 3.4 percent over the past 10 years.

The unemployment rate averaged at a low level of 3.3 percent with a headline inflation rate of 3 percent in 2015, Tsang said.

Tax break

To ease the financial burden of corporations, the Hong Kong government will introduce a tax concession of 75 percent under salaries tax and personal assessment for the fiscal year 2015-2016, capped  at HK$20,000. Nearly 1.96 million taxpayers are expected to benefit from this policy and the SAR government expects to see a HK$17 billion loss in revenue.

The Hong Kong government will also waive property rates for the fiscal year 2016-2017, subject to a ceiling of HK$1,000 per household per quarter. Some 3.17 million properties are expected to benefit from this policy and the government expects to lose HK$11 billion in revenue.

Gloomy outlook

In offering the gloomy outlook the financial secretary noted that the value of total exports slumped 1.7%, export of services 0.6% and the number of visitor arrivals in Hong Kong dropped 2.5%, with declines likely to be more severe in 2016. Retail sales also dipped last year, registering their first annual decline since 2009.

Tsang noted the notorious forced shopping is detrimental to the city's tourism industry. He believed Hong Kong's tourism sector is embrace a period of adjustment, hoping to attract more overnight tourist with stronger spending power.

Tsang went on to say, “The local economy is laden with risks in the year ahead; the outlook is far from promising.”

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