Hong Kong Budget 2017-2018

Hong Kong economy grew 1.9 per cent in 2016, finance chief reveals

Paul Chan also notes that big budget surplus of almost HK$93 billion was spurred by more revenue from land sales and stamp revenue

PUBLISHED : Wednesday, 22 February, 2017, 4:34pm
UPDATED : Thursday, 23 February, 2017, 10:53am

Hong Kong’s economy grew by just 1.9 per cent in 2016 despite 3.1 per cent growth in the fourth quarter, Financial Secretary Paul Chan Mo-po said in his maiden budget on Wednesday.

Chan attributed the modest growth mainly to the impact of the grim global economic situation on Hong Kong’s trade performance, particularly in early 2016.

The figure was near the upper end of the projection by his predecessor, John Tsang Chun-wah, whose forecast in last year’s budget speech was between 1 per cent and 2 per cent.

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Chan forecast that the economy would expand by 2 per cent to 3 per cent this year.

He forecast a surplus of HK$92.8 billion for the 2016-17 fiscal year, compared to Tsang’s projection of HK$11 billion.

The huge surplus was achieved largely on the back of higher-than-expected revenue from land sales and stamp duty, Chan said.

“Revenue from land sales is HK$50.8 billion, or 76 per cent higher than the original estimate, demonstrating yet again that land revenue has always been highly volatile and vulnerable to market fluctuations,” Chan said.

“As a result of a period of hectic trading in the property market last year, stamp duty revenue for the whole year will be HK$8 billion, or 16 per cent higher than estimated,” he added.

The former development minister became financial secretary last month after Tsang resigned to run for the post of chief executive. It was his maiden budget and also the last one under the administration of Leung Chun-ying, whose term will end in June.

Just a month into his new job, Chan was not expected to depart much from Tsang’s perceived conservative fiscal approach to introduce drastic tax measures or fiscal policies, according to Stephen

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Wong, deputy executive director at the public policy think tank, Our Hong Kong Foundation.

Presenting his medium-range economic forecast, Chan estimated that the city’s average annual growth rate would be about 3 per cent in real terms from 2018-21, with an average inflation rate of 2.5 per cent.

But he noted: “Over the medium term from 2018-19 to 2021-22, growth of recurrent government expenditure is estimated to range between 5.3 per cent and 9.8 per cent per annum, consistently higher than the average annual nominal economic growth of 4.5 per cent over the same period.

“Sustainability is an issue which deserves our attention.”

On IT development, Chan said he would set up a new committee on innovation and technology development and re-industrialisation. A new tax policy unit would also explore enhanced tax deductions for IT expenditure.

To help the development of financial technology (fintech), Chan noted that the Hong Kong Monetary Authority was developing a new faster payment system to provide an around-the-clock interbank real‑time payment platform.