Maintaining competitive edge key as Hong Kong delivers budget

[HONG KONG] Hong Kong is expected to unveil measures to support low-income families and boost the city's labour market in its annual budget on Wednesday, although an uncertain economic outlook makes bold new initiatives unlikely.

The government has warned that the Chinese-controlled city risks losing its competitive edge and must strive to maintain economic stability after more than two months of pro-democracy protests paralysed parts of the Asia financial centre.

Finance Secretary John Tsang is also expected to announce economic growth for the fourth quarter of last year, when tens of thousands of democracy activists severely disrupted daily life before police cleared protest camps in December.

Hong Kong's economic expansion was seen at 2.1 per cent in the fourth quarter, according to six analysts polled by Reuters, slowing from annual growth of 2.7 per cent in the third quarter.

Hong Kong is forecast to outline relief measures for the poor and elderly, take steps to provide more affordable housing, and offer incentives to encourage greater workforce participation, economists said.

Home prices have more than doubled since 2008 in one of the world's most expensive property markets, putting a strain on business costs and worsening income gaps. More than one million of the city's seven million people live below the poverty line.

One-off measures could include a salaries tax rebate, a waiver on property rates, raising the tax allowance for parents from HK$70,000 (S$12,250) to HK$80,000 per child and policies to support industries affected by the protests, according to local media.

Mr Tsang is also expected to dish out sweeteners worth more than HK$20 billion in the budget, local media reported.

Hong Kong, which has a minimum wage of HK$32.50 per hour, has handed out billions in previous years, although Wednesday's budget is not expected to reveal any major initiatives, given the uncertain economic outlook.

The former British colony's fortunes are closely tied to mainland China, where the economy grew at its slowest pace in 24 years in 2014 as property prices cooled and companies and local governments struggled under heavy debt burdens.

Mr Tsang is expected to announce a budget surplus of at least HK$60 billion for the financial year ending March 31, according to accounting firms Deloitte and KPMG, handily beating the government's forecast for a HK$9.1 billion surplus.

REUTERS