Financial Secretary Paul Chan delivered his second budget speech. In terms of economy, he said under mounting external pressures, Hong Kong's economic growth moderated from 4.1 per cent in the first half of 2018 to 2.1 per cent in the second half of the year, with growth for the fourth quarter at a mere 1.3 per cent, the lowest since the first quarter of 2016.  Overall, Hong Kong's economy grew by 3% in 2018, at the lower end of the range projected in last year's Budget but it was still higher than the trend growth rate of 2.8% over the last decade.

Looking ahead for 2019, the global economy, beset with considerable uncertainties and downward pressures, has abruptly turned from synchronized robust growth early last year to the current synchronized slowdown.  Market sentiment has become increasingly cautious. IMF lowered its global economic growth forecast for 2019 twice in the past five months, from 3.9 per cent down to 3.5 per cent, an indication that the slowdown risks should not be ignored. In fact, these uncertainties have greatly affected investors' risk appetite. The stock markets in the US, the Mainland and Hong Kong dropped significantly within a short time in the past year.  The prices of investment products also saw marked fluctuations.

The uncertain global economic outlook this year will restrain Hong Kong's economic performance.  Having regard to the latest internal and external developments, government will make optimal use of the fiscal surplus for 2018-19 to introduce one-off measures to support enterprises and relieve people's burden. Together with the stimulus effect of other measures in the Budget, the government forecast economic growth of 2 to 3% in real terms for Hong Kong in 2019.

On inflation, the moderate economic growth forecast for this year may reduce the pressure on local costs. Pressure on local rentals eased recently and may also contribute to a lower headline inflation rate. Imported inflation may also be moderated along with the strengthening of the US dollar. Taking various factors into account, the government forecast that the headline inflation rate and the underlying inflation rate for 2019 will both be 2.5%.