Source: AFP
Hong Kong’s economy could shrink in the first quarter of 2012 due to weak export markets, before rebounding to post growth of 1 to 3 per cent over the year, the finance secretary said Wednesday.
John Tsang warned the global economy was facing a downturn worse than the 2008 financial meltdown as he released his annual budget in the southern Chinese banking centre.
“Despite our resilience, we will not lower our sense of crisis,” he said.
Turmoil in financial markets and “unresolved economic troubles” related to the debt crisis in Europe and the United States “could deal a more serious blow to the global economy than the 2008 financial tsunami”, Tsang warned.
“We must, therefore, stay alert to unexpected crises and take precautions against any impact on our society,” he added in a budget speech that promised a series of stimulus measures in the form of lower taxes and one-off perks.
Tsang said the semi-autonomous territory would “inevitably” experience lower economic growth this year than the average rate over the past decade.
Exports could take a hit in the early months before recovering in the second half, Tsang said in a speech that was interrupted by shouted protests from opposition lawmakers.
“I am not optimistic about Hong Kong’s export performance in the first half of this year, and if exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter.”
The city’s economy contracted in the second quarter of 2011 before returning to positive territory in the third quarter.
“I forecast GDP growth of 1 to 3 per cent in real terms for 2012,” Tsang said.
The range between the upper and lower estimates “reflects the unusually large degree of uncertainties in the external environment this year, especially when the European debt crisis is still twisting and turning,” he said.
“It is difficult to predict with any certainty the possibility of a severe recession in Europe and, if so, the precise ramifications on Asia.”
In his last budget ahead of March elections to select a new chief executive in the former British colony, Tsang promised HK$80 billion (US$10.31 billion) in measures to “better prepare our people for the difficult time ahead”.
He pledged to increase loan guarantees for lenders to small businesses, slash profits tax and spend more on education, including construction of a new International Cuisine College to train chefs.
Seven one-off measures included a waiver of quarterly property rates amounting to HK$11.7 billion and covering 90 per cent of properties, and a 75-per cent cut in salaries tax to a ceiling of HK$12,000.
The salaries tax cut alone would inject almost HK$9 billion back into the economy, Tsang said.
Median household income had climbed 5.1 per cent in real terms to HK$20,000, meaning an “improvement in the livelihood of grassroots” residents over the past year, Tsang said.
Even so, the gap between rich and poor in Hong Kong is among the largest in the world and Chief Executive Donald Tsang has identified it as one of the territory’s biggest challenges.
His government has been criticised for running up large budget surpluses ‒ fiscal reserves stood at HK$654.9 billion on 31 December 2011 ‒ and clinging to a low tax regime instead of spending more to stimulate growth, boost employment and improve social services.
