Hong Kong forecasts rebound in economy

Πηγή: FT
By Josh Noble
Feb 27 2013

A rebound in mainland Chinese growth and a healthy jobs market helped Hong Kong’s economy to pick up in the fourth quarter, as the government announced a series of measures to help the poor in the developed world’s most unequal society.

But the territory’s full-year growth of 1.4 per cent was a sharp drop from the 4.9 per cent recorded in 2011, as the mainland Chinese economy expanded at its slowest pace rate for a decade.

Hong Kong delivered a strong final quarter, during which the economy expanded 2.5 per cent from a year earlier. Domestic consumption and investment spending offset weakness in trade, Hong Kong’s traditional strength, according to official figures released on Wednesday.

The government said it expects growth this year to be between 1.5 per cent and 3 per cent, which Raymond Yeung, an economist at ANZ, said reflected a “relatively conservative stance regarding the prospects for the economy . . . given the uncertainty about the global outlook”. Mr Yeung forecasts growth of 3.7 per cent in 2013, based on an improvement in exports and tourism.

“Trade will recover very soon on the back of a recovery in Chinese demand . . . so long as trade [returns] Hong Kong’s economy will remain vibrant,” he said.

The annual growth figures were released to coincide with Hong Kong’s 2013 budget.

In his budget speech, Hong Kong’s financial secretary John Tsang said: “The intricate external environment will remain unstable in the year ahead. 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.”

The Hong Kong government also announced a fiscal surplus of HK$64.9bn (US$8.4bn), buoyed by rising lands sales and taxes on corporate profits. Authorities had previously forecast a deficit of HK$3.4bn.

Some of those funds will be used for poverty relief measures, such as an increase in child and old-age living allowances, electricity subsidies and short-term food assistance.

Hong Kong, home to 7m people, enjoys an average per capita income of US$30,000, but suffers the worst inequality in the developed world, according to the UN.

However, analysts described the proposed moves to reduce inequality as “disappointing”.

“People living in Hong Kong feel the impact of rising inflation, which has adversely affected their living and businesses,” said Jennifer Wong, partner at KPMG China, in a written response to the budget. “However, the relief measures do not significantly benefit the middle class and small and medium-size enterprises. The overall scale is also smaller than last year.”

Donna Kwok, economist at HSBC, warned that inflation pressures were likely to return as the economy improved, made worse by continued quantitative easing – purchases of assets by central banks – in developed countries, persistently high housing costs and the upcoming increase in Hong Kong’s minimum wage.

The government also said it would add HK$15bn to its community care fund and a further HK$15bn to help retrain unskilled workers.

“While these are positives, they won’t solve Hong Kong’s social issues overnight,” said Agnes Chan, managing partner at Ernst & Young.