Leung Raises Spending on Poor as Hong Kong Economy Gains
Hong Kong Chief Executive Leung Chun-ying increased spending on the poor and elderly in his government’s first budget, offering a growth boost to an economy burdened with record housing costs.
The fiscal plan will bolster gross domestic product gains by 1.3 percentage points, Financial Secretary John Tsang said today in a speech. The city’s GDP expanded 2.5 percent last quarter from a year earlier, the most in a year, a bright end to what was the weakest annual expansion since 2009.
Leung, whose popular support has tumbled since he took office in July, is seeking to direct public funds to fulfill campaign promises of narrowing a record wealth gap and helping the aged. The former property surveyor increased welfare spending by about a third in the budget, handing out allowances to more than 400,000 elderly residents and pumping $2 billion into a poverty alleviation fund in the budget.
“The overall tone of the budget shows that the government is keen to help the lower-income class,” Raymond Yeung, a Hong Kong-based senior economist at Australia & New Zealand Banking Group Ltd., said by telephone. “Infrastructure spending by the government and measures to maintain full employment in Hong Kong will help the city’s economy to improve further.”
Tsang today also unveiled HK$33 billion ($4.3 billion) of one-time measures, including tax rebates and electricity subsidies.
The benchmark Hang Seng Index (HSI) was little changed at 1:43 p.m. local time. It’s up about 16 percent since Leung took office.
Fourth-quarter economic expansion of 2.5 percent is up from the third quarter’s 1.4 percent, mirroring similar acceleration in other Asian economies as global demand improves. Hong Kong’s economy expanded 1.4 percent in 2012 and Tsang is projecting growth of 1.5 percent to 3.5 percent this year.
“Fundamentals in Asia remain strong and the mainland economy regained its growth momentum in the fourth quarter,” Tsang said. “Barring an abrupt deterioration in the demand from the advanced economies, Hong Kong’s external trade should see some improvement.”
To bolster long-term economic growth, Tsang said the government will increase infrastructure spending and look to expand the city’s logistics and fund-management industries. It is studying the building of a new container terminal and will also spend more on training workers, he said.
The city will sell as much as HK$10 billion worth of inflation-linked bonds under the government’s bond program, which will be doubled to HK$200 billion, Tsang also said.
Hong Kong is increasing recurrent spending on welfare programs, which will advance 31 percent to HK$56 billion in the fiscal year starting April 1, as the population grays. The proportion of people age 65 and older reached 14 percent last year and is expected to account for 30 percent by 2041, Tsang said.
“Judging from the current demographic trends, our economic growth will certainly continue to taper off in the 2020s,” Tsang said.
In his first policy address last month, Leung promised to boost the supply of housing, tackle pollution and provide more care for the elderly. Last week, he imposed new property curbs as record-low interest rates and an influx of buyers from China fueled a doubling in home prices since early 2009.
Hong Kong’s Gini coefficient, a measure of income inequality, rose to 0.537 in 2011 from 0.525 in 2001, the government said last June. The score, a high for the city since records began in 1971, is above the 0.4 level used by analysts as a gauge of the potential for social unrest.
Leung is the least popular Hong Kong leader after seven months in office, according to survey data from the University of Hong Kong’s Public Opinion Program. Opposition lawmakers have sought to oust him over illegal additions found at his home.
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