At the end of last month the Hong Kong government unveiled its budget plans for the fiscal year 2013/2014, with the financial secretary, John Tsang, outlining a package of stimulus measures totalling HK$33.0bn. The budget aims to kick-start the economy and is designed to provide support to low income groups as well as middle class tax payers and small and medium sized firms. Key measures include a one-off 75% reduction in personal income tax, which will be capped at HK$10,000 and providing subsidies on electricity charges. Other one-off stimulus measure came in the form of paying two months’ rent for public housing tenants and waiving property taxes. In a bid to provide support to small and medium sized firms, the financial secretary announced that he would waive the business registration fees as well as reduce profits tax by 75% (subject to a ceiling of HK$10,000) for 2013/2014. The government also hopes to support the territory’s financial sector and outlined several measures to help expand Hong Kong’s investment fund industry. For fiscal year 2013/2014, government expenditure is expected to reach HK$440.0bn against revenues of HK$435.1bn, which will result in a modest budget deficit of HK$4.9bn. This compares with a surplus of HK$64.9bn posted in fiscal year 2012/2013.
In his budget speech, Mr Tsang also revealed that the economy grew by just 1.4% for the whole of 2012. Economic activity ended last year on a stronger note after real GDP growth bounced back by 2.5% (y-o-y) in Q4, up from 1.4% in Q3. The government expects a modest improvement in 2013 and is projecting growth of between 1.5-3.5%, while our panel believes it will come in at the top end of this range, followed by a further strengthening of economic activity in 2014.
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