Hong Kong unveiled HK$34 billion (S$6 billion) of sweeteners in its budget yesterday, including help for businesses hit by pro-democracy protests, as it works to rebuild confidence in a city that some fear is losing its competitive edge.
The government has warned that the Asian financial hub must make economic stability a top priority, after more than two months of pro- democracy protests late last year paralysed parts of the city and unnerved the authorities in Beijing.
The growth rate was just 2.3 per cent last year, down from 2.9 per cent the previous year and far slower than the three to four per cent predicted in last year's budget speech.
Delivering his budget for 2015-16, Finance Secretary John Tsang said that local industries had been damaged by the protests, which began in late September and brought parts of the city to a standstill.
"Prolonged political bickering is detrimental to public administration and the international image of Hong Kong as a stable, law-abiding and efficient city," he said. "It may even dampen investors' confidence in Hong Kong. Such self-inflicted harm does not serve the city well."
Mr Tsang announced measures worth HK$290 million to help businesses hurt by the Occupy Central demonstrations, including waiving licence fees for 26,000 restaurants and other food outlet operators, and running events to promote Hong Kong to investors and tourists.
In spite of this, he expected a budget surplus of HK$63.8 billion for the financial year ending on March 31, handily beating the government's earlier forecast for a HK$9.1 billion surplus.
With Hong Kong's large budget surpluses, taxpayers have become accustomed to sweeteners, accounting specialists said, although some questioned if this was the best long-term strategy.
"Over the past six or seven years, the financial secretary has given away HK$272 billion as one-off sweeteners. If that much money was spent elsewhere, it could actually benefit Hong Kong more in the long term," said Tracy Ho, EY managing partner for tax for Hong Kong and Macau.
The economy's disappointing growth was also due to the weak euro zone and Japan's recession, said Mr Tsang. He announced a raft of measures to boost public spending after slashing it last year, as the government comes under increasing pressure over social inequality - frustrations which also fuelled last year's mass rallies.
Measures include reductions in salaries tax and rent support for low-income families in public housing.
Dozens of protesters outside the Legislative Council building questioned the government's spending choices before the budget speech.
"Why is it so many people cannot afford a house or that they have to pay such high rents?" asked Ramon Yuen, an accountant.
"It's because the government reacts too slowly...they are too conservative. The government should cut down on the surplus and spend more."
Mr Tsang said that HK$50 billion would be earmarked for "retirement protection" for the elderly, but gave no further details.