Hong Kong budget focuses on economic recovery

19:10, February 24, 2010      

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Hong Kong's financial chief John Tsang on Wednesday proposed in a budget speech measures to build on the economic recovery while preventing asset bubbles, in addition to relief measures worth some 20 billion HK dollars (2.56 billion U.S. dollars).

Delivering the budget proposals for the fiscal year 2010-11 at a meeting of the Legislative Council, Tsang pledged to carefully adjust exceptional measures and put in place measures to prevent asset bubbles in the local real estate market, including adjusting land supply and raising the stamp duty rate on high-end transactions.

The Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government said that he expected Hong Kong's economy to grow by 4-5 percent in 2010, with employment to further improve and the underlying inflation to be 1.5 percent.

"I am cautiously optimistic about Hong Kong's economic prospects for 2010," he said.

Tsang said the latest financial crisis was much more severe than the 1997 financial storm, but the Hong Kong economy recovered more quickly, growing by 2.6 percent in the second quarter of 2009 and contracted by only 2.7 percent for the full year.

There remained uncertainties and potential pitfalls in the external environment given that the labor markets in the developed economies have yet to improve, and it remained uncertain whether some of the economies can grow robustly after the effects of the stimulus measures subsided, he said.

Nevertheless, the strength of the mainland economy is expected to offset the fragile recovery of overseas markets, he added.

Tsang said Hong Kong is in its early stage of economic recovery, but the exceptional measures put in place by the HKSAR government should not, and could not, be sustained for long.

"Governments around the world are now making plans to exit from their exceptional measures. Some have already begun to progressively execute these plans. We should also prepare to adjust our exceptional measures at a suitable time," he said.

Tsang pledged to, among others, adjust land supply and raise the stamp duty rate on transactions of properties valued over 20 million HK dollars (2.56 million U.S. dollars) from 3.75 percent to 4.25 percent, with effect on April 1.

"The increased risk of a bubble forming in the property market has also aroused public concern about the difficulty in buying homes," he said.

Tsang said the three objectives for the 2010-11 budget were " consolidating the recovery, developing our economy and building a caring society.

Tsang pledged to continue investing in infrastructure, build on the strength of Hong Kong as a financial center and diversify the local economic growth into new industries such as medical services, education services, environmental industries, testing and certification, innovation and technology, and cultural and creative industries.

Tsang also pledged to further regional cooperation, saying that Hong Kong should make use of its strengths to support the development strategy of the mainland economy and seek an important role in developing the national 12th five-year plan.

Exchange and cooperation between Hong Kong and Taiwan in economy and culture and at the corporate level will also be enhanced.

Tsang also pledged support for developing a green economy by improving the water quality of Victoria Harbor and encouraging the transport sector to test environment-friendly vehicles.

Tsang proposed to spend heavily in housing, health care and social welfare, with the relief measures in the new budget, including tax rebates, rates concessions and public housing rental waivers, worth nearly 20 billion HK dollars (2.56 billion U.S. dollars).

To support anti-drug efforts, the Financial Secretary proposed injecting 3 billion HK dollars (384 million U.S. dollars) into the Beat Drugs Fund.

Tsang forecast a 13.8 billion HK dollar (1.77 billion U.S. dollars) surplus for 2009-10, a deficit of 25.2 billion HK dollars (3.23 billion U.S. dollars) for 2010-2011, and a return to fiscal balance by 2013-14.

Source: Xinhua
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