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RPT-UPDATE 1-Hong Kong unveils expansionary budget, push into innovative industries

Kitco News

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* Govt estimates 2018 GDP to expand 3-4 pct

* Q4 GDP +3.4 pct y/y vs Reuters economists survey of +3.2 pct

* Govt sees 2018 headline inflation at +2.2 percent

* HK$50 billion pledged for long-term tech and innovation push

By James Pomfret and Donny Kwok

HONG KONG, Feb 28 (Reuters) - Hong Kong unveiled short-term relief measures and capital spending initiatives to sustain growth in an expansionary budget on Wednesday that carried hefty strategic spending to try to bolster the city's innovation industries.

Financial Secretary Paul Chan, addressing the city's lawmakers in his annual budget speech, also pledged to address livelihood challenges including a widening wealth gap, astronomical property prices. He also announced a 13.3 percent increase on annual spending on healthcare to help the over-burdened public health system.

Over HK$50 billion ($6.4 billion) would be earmarked for "investing in the future", Chan said, to help innovative and creative industries include a start-up fund and investments in sectors such as fintech.

Hong Kong is widely seen to be lagging far behind the new industry push of rivals like the southern China tech hub of Shenzhen, and Singapore.

"Information and Technology is undoubtedly an economic driver in the new era. To shine in the fierce I&T race amidst keen competition, Hong Kong must optimise its resources by focusing on developing its areas of strength, namely biotechnology, artificial intelligence, smart city and financial technologies," Chan said.

The city's economy grew 3.4 percent in the fourth quarter from a year earlier, Chan said, while full-year 2017 GDP came in slightly faster than government expectations at 3.8 percent - the fastest since 2011 - and up from 1.9 percent growth in 2016. GDP this year is expected to grow 3-4 percent, Chan added.

The fourth quarter grew a seasonally adjusted 0.8 percent from the third.

Six economists surveyed by Reuters expected fourth quarter growth of 3.2 percent from a year earlier, down from 3.6 percent in the July-September quarter. The economists did not provide quarterly forecasts.

Economists had forecast GDP to ease in 2018 to 3.1 percent.

The property sector, however, is seen by analysts as a potential risk as U.S. interest rates trend higher and weigh on mortgage payments and household consumption.

Hong Kong's home prices have surged for 15 straight months despite repeated cooling measures, further exacerbating public discontent towards housing affordability in the city of 7.4 million. "Housing supply has been a long standing problem in Hong Kong. The government has been making every effort to identify land and boost housing supply," Chan said, adding that 20,800 private residential units would be completed annually over the next five years.

($1 = 7.8286 Hong Kong dollars)

(Editing by Jacqueline Wong)

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