- POSTED: 26 Feb 2014 23:39
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Hong Kong has announced a conservative budget for the city, as its Financial Secretary John Tsang warned of a looming fiscal deficit.
HONG KONG: Hong Kong has announced a conservative budget for the city, as its Financial Secretary John Tsang warned of a looming fiscal deficit.
Relief measures worth US$2.6 billion were confirmed, 40 percent lower than last year, despite the government posting a fiscal surplus of US$1.5 billion.
As is the tradition, this year's Budget speech got off to a noisy start as dozens of protesters waved banners and shouted slogans demanding more tax breaks and welfare spending.
In the Legislative Council, Mr Tsang painted a gloomy picture warning that Hong Kong, as an open economy, isn't out of the woods yet.
"It is likely that there will be larger and more frequent capital flows into and out of Hong Kong. We must be prepared to withstand the inevitable volatility while adapting to the underlying changes in the global landscape," he said.
Economic growth this year is expected at between 3 and 4 percent, better than last year's, but still below the city's average of 4.5 percent in the last ten years.
Mr Tsang also warned the city faces structural budget deficit in seven years' time, according to a finding in a government commissioned survey.
Still, he is digging into public coffers to dish out US$2.6 billion in short-term relief measures - in the form of rebates on salaries tax, waivers for rents and rates - and raising the allowance for the maintenance of a dependent or grandparent.
For those claiming welfare, they get an extra month's allowance.
"Some in the public are wary of any excessive growth in our spending, and are worried that Hong Kong will be moving towards welfarism. I understand their concern. However, I would like to point out that government's welfare spending is meant to help the needy by providing them with short-term relief," said Mr Tsang.
The opposition Hong Kong Democrats were not impressed, accusing the government of a lack of long-term planning to keep the city competitive.
"I think this Budget is just a continuation of the Budgets in the past, and every time, the Budget disappoints many Hong Kong people, because it is not the behaviour of a responsible government. What a government should do, especially in a wealthy place like Hong Kong, is to invest in the future, to build good schools, hospitals, have good welfare systems," said Emily Lau, chairwoman of the Democratic Party.
As expected, there were no changes to property curbs in place to cool prices in the city, now one of the most expensive places in the world to buy real estate.
To address the issue of land supply, Mr Tsang has identified 150 sites for residential use, and that could provide about 210,000 public and private units in the next five years.
But the financial secretary made no mention of the need for the city to meet the shortfall of workers that the city will face in less than four years' time, and that may impact productivity.
Francis Lun, CEO of GEO Securities, said: "It is a conservative Budget that does not address the future needs of Hong Kong. A government should plan for the future, but not in the negative sense, saying that we're getting old, the income will decline, but instead, we should plan how to sustain the rate of economic growth at 5%, not 2.9%. I think it is not a forward-looking Budget and I'm disappointed with it."
In its defence, the government says it has dished out billions of dollars by way of tax concessions and cash handouts in recent years since the 2008 global financial crisis.
This year, the public was not expecting much from the Budget in terms of help for the middle and working-class. But even those low expectations were not met.