HONG KONG -- The Hong Kong Special Administrative Region government on Wednesday unveiled a budget for the new financial year, with a focus on measures to support the speedy recovery of the economy.

The Hong Kong economy will see a visible rebound this year with growth of 3.5 percent to 5.5 percent for the year as a whole, Financial Secretary of the HKSAR government Paul Chan said while delivering the 2023-24 budget at the HKSAR's Legislative Council.

As overall economic sentiment improves in tandem with the revival of economic activities domestically as well as the rapid return of Hong Kong's exchanges with the mainland and the world to normalcy, private consumption will increase, he noted.

The Hong Kong economy contracted by 3.5 percent year on year in 2022 amid both external and domestic headwinds, while the underlying inflation rate remained moderate at 1.7 percent last year, Chan noted.

He forecast that the underlying inflation rate and the headline inflation rate will rise to 2.5 percent and 2.9 percent respectively this year, taking into account domestic cost pressures alongside the economic recovery.

The economy will grow by an average of 3.7 percent annually in real terms from 2024 to 2027, higher than the trend growth of 2.8 percent during the decade before the pandemic. The underlying inflation rate is forecast to average 2.5 percent annually, he said.

"In the medium to long term, the Hong Kong economy will see abundant opportunities," Chan said.

The HKSAR will take a "moderately liberal" fiscal stance in the new financial year, leading to a deficit budget, he said, adding that more than 80 percent of the resources involved for the budget initiatives will benefit the general public and small and medium-sized enterprises.

The HKSAR government has been adopting an expansionary fiscal policy during the COVID-19 pandemic, accumulating a "fairly high" fiscal deficit over the past three years.

Taking into account financial affordability, Chan proposed targeted measures to support people and enterprises and boost the momentum of the HKSAR's economic revival, including the issuance of electronic consumption vouchers of 5,000 Hong Kong dollars (about $637), noting that the previous two rounds of consumption voucher scheme were well received by the community.

To enhance Hong Kong's international image, the HKSAR government will earmark 100 million Hong Kong dollars for attracting more mega events with significant visitor appeal and tourism promotional effect to be staged in Hong Kong, he said.

Other incentives also include certain tax cuts for companies to ease their operating pressure as well as one-off relief measures to alleviate the economic pressure on the public, he added.

Noting that the city is faced with heavy fiscal deficits, Chan said that the HKSAR will continue to adhere to the principles of exercising fiscal prudence, keeping expenditure within the limits of revenue, committing resources as and when justified and needed, strictly containing the growth of government expenditure and exploring various ways to increase revenue.

"The key direction for increasing government revenue is 'growing the pie' with a view to driving up revenue through economic growth," he said.

He proposed that the rate of profits tax and salaries tax, the major sources of revenue, should remain unchanged this year, while imposing an annual special football betting duty of 2.4 billion Hong Kong dollars on the Hong Kong Jockey Club under the Betting Duty Ordinance for five years starting from 2023-24, while the current betting duty rates remain unchanged.

Expressing full confidence in the future of Hong Kong, Chan said that the next five years are important for Hong Kong to break new ground and achieve another leap forward.

"While there are both opportunities and challenges for the future of Hong Kong, opportunities definitely outnumber challenges," he said.