Hong Kong's 2014 inflation pegged to soar to 4.6%

While GDP growth is forecasted at 3-4%.

The 2014-15 Budget has just concluded. Overall, there were not a lot of surprises in the Budget, says Barclays.

There were no changes to the various property demand-side measures and the reduction in one-off relief measures had been well flagged to the market.

Here’s more from Barclays:

In 2013, Hong Kong’s GDP grew 2.9% with headline CPI of 4.3% and underlying inflation at 4.0%. For 2014, the Budget expects GDP growth between 3-4% and headline inflation at 4.6% with underlying inflation at 3.7%. The 2013-14 Budget Surplus is estimated at HK$12bn, the lowest in five years. Land sale proceeds came in at HK$84.1bn, 22% higher than the initial forecast. For FY 2014-15, the Budget forecasts land revenue of HK$70bn and an overall fiscal surplus of HK$9.1bn.

The 2014-15 Budget ran through the various findings and recommendations from the Working Group on Long-Term Fiscal Planning. While it discussed the three projections from the Working Group based various expenditure levels and the Working Group’s recommendation to implement a combination of containing expenditure growth, preserving the revenue base and saving for future generations to cope with the fiscal challenges, no detailed measures were introduced at this stage.

The total amount of relief measures scaled down to HK$20bn, with fiscal stimulus effect on GDP of 0.7%. These include:

• Reduction in salary tax and tax under personal assessment to be maintained, with a ceiling of HK$10,000.

• Property rates waiver down from four quarterly HK$1,500 waivers to just the first two quarters of 2014-15, subject to a ceiling of HK$1,500/quarter.

• Waiver on public housing rents to be reduced from two months to one month.

• Extra allowance to recipients of CSSA, Old Age Allowance, Old Age Living Allowance and Disability Allowance, equal to one month of the allowances, to be maintained.

• Increase in allowance for Dependent Parent and Dependent Grandparents to HK$40,000 (from HK$38,000) (age 60 and above) and HK$20,000, from HK$19,000 (age 55-59).

• Electricity subsidy of HK$1,800 per residential account phased out as it was no longer mentioned.