HK ex­pects slow­ing growth as tourism slumps

The Pak Banker - - MARKETS/SPORTS -

Hong Kong's econ­omy may grow at its slow­est an­nual pace since at least 2012, as a slump in tourist ar­rivals and ex­ports con­tin­ues to worsen, Fi­nan­cial Sec­re­tary John Tsang said.

The econ­omy may ex­pand by 1 per­cent to 2 per­cent in 2016, slower than the 2.4 per­cent gain last year, Tsang told law­mak­ers on Wed­nes­day in his an­nual bud­get speech. Gross do­mes­tic prod­uct growth ad­vanced 0.2 per­cent in the fourth quar­ter from the pre­ced­ing three months, below the 0.3 per­cent es­ti­mate of econ­o­mists sur­veyed by Bloomberg.

"Lo­cal con­sump­tion and in­vestor sen­ti­ment have been dented by con­cerns over the un­cer­tain­ties as­so­ci­ated with the U.S. in­ter­est rate in­creases and the dim­mer global eco­nomic out­look," Tsang said. "The lo­cal econ­omy is laden with risks in the year ahead; the out­look is far from promis­ing." With fewer Chi­nese tourists shop­ping in Hong Kong, the city's re­tail­ers have seen sales fall for a se­cond straight year, while home prices have dropped 11 per­cent since Septem­ber. Tsang is also faced with the chal­lenge of lift­ing growth as so­cial ten­sion wors­ens, with a riot two weeks ago sparked by il­le­gal hawk­ers lead­ing him to warn of wors­en­ing un­rest and the po­ten­tial im­pact on the econ­omy.

The bench­mark Hang Seng In­dex fell 1.2 per­cent to 19,192.45, tak­ing the de­cline for the year to 12 per­cent.

To bol­ster the econ­omy, Tsang cut taxes for small- and medium-sized busi­nesses and waived li­cense fees for travel agents, ho­tels and restau­rants hurt by the slow­down in tourism. For in­di­vid­u­als, the govern­ment will in­crease al­lowances and re­duce salary taxes for the fis­cal year start­ing April 1. The new bud­get mea­sures will boost GDP by 1.1 per­cent, he said. "De­spite Hong Kong's ex­pan­sion­ary FY16-17 bud­get, we ex­pect eco­nomic growth to lose more momen- tum in 2016," No­mura econ­o­mist Young Sun Kwon wrote in a re­search note. "The equity and hous­ing mar­ket corrections will likely be a drag on pri­vate con­sump­tion." No­mura cut its 2016 GDP es­ti­mate to 1.5 per­cent, down from 2.3 per­cent, and its 2017 es­ti­mate to 2.0 per­cent, down from 2.9 per­cent. Risks re­main skewed to the down­side, Kwon said.

Tsang be­gan and ended his speech ex­press­ing con­cern about the wors­en­ing so­cial ten­sion since the Oc­cupy Hong Kong protests in 2014. The riot at Mong Kok, a pop­u­lar shop­ping district, dur­ing the Chi­nese New Year hol­i­day, wran­gles among law­mak­ers, as well as groups shout­ing insults at tourists are all signs of a po­lar­ized so­ci­ety, he said.

"If we should al­low the sit­u­a­tion to get worse, what lies in store for Hong Kong will be even greater chaos, and our fu­ture gen­er­a­tions will grow up in the midst of ha­tred and mal­ice," Tsang said.

Since the Oc­cupy protests, when stu­dents had seized key streets in the city to de­mand more democ­racy, groups of ac­tivists have emerged ad­vo­cat­ing in­de­pen­dence from China. Some also took part in protests last year against so- called par­al­lel traders com­ing across Chi­nese bor­ders to buy daily ne­ces­si­ties to re­sell in China.

Tsang to­day re­peated the govern­ment's com­mit­ment to in­crease hous­ing sup­ply af­ter prices soared to make the city the world's most ex­pen­sive place to own a home. The govern­ment wants to pro­vide 280,000 pub­lic hous­ing units over the next 10 years, and plans to sell land for about 19,000 pri­vate homes in 20162017, he said.

To help el­derly cit­i­zens, Tsang also an­nounced plans to is­sue a "Sil­ver Bond" this year and in 2017 for res­i­dents aged 65 and older who are look­ing for in­vest­ment prod­ucts with fixed re­turns.

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