HONG KONG - Hong Kong's economic growth is expected to expand by 3 to 4 percent in 2014, lower than the average annual growth rate of 4.5 percent over the past decade, Hong Kong's Financial Secretary John Tsang said in his budget speech Wednesday.

Hong Kong's economy expands 2.9% in 2013

He warned that 2014 remains a challenging year due to the uncertainty around the US quantitative easing exit strategy, the sluggish economic recovery in the eurozone, Japanese government's heavy debt as well as geopolitical uncertainties.

"The fiscal issues faced by these advanced economies have features in common, namely imbalanced fiscal structures, high debts and high unemployment rates," he said.

Tsang cited faster economic growth in the mainland, positive local consumption, growing inbound visitor numbers and increasing major infrastructure works as boons to the city as it tries to accelerate its economic growth.

On inflation, he said as the uptrend of factor costs is tapering off and rentals for fresh-letting of flats and shops were markedly slower, inflation pressure this year will be eased.

"The headline inflation for 2014 will average 4.6 percent and underlying inflation at 3.7 percent," he said.

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