HONG KONG (REUTERS) Hong Kong expects economic growth to come in between 1.5 to 3.5 per cent in 2013, the city's financial secretary John Tsang said in his annual budget speech on Wednesday, while offering a raft of relief measures, tax concessions and sweeteners.

"The intricate external environment will remain unstable in the year ahead," said Mr Tsang, warning of potential instability from currency wars and a trade slowdown to the financial hub's small and open economy.

A poll of eight banks estimated that Hong Kong's gross domestic product (GDP) this year would grow 3.1 per cent, accelerating from GDP growth of 1.4 per cent in 2012, its slowest rate since 2009.

In a budget short on bold steps, Mr Tsang offered a mixed bag of policies, including various relief measures for the poor and elderly, a marginal corporate tax and salary rebate and moves to bolster the city's financial sector and private equity industry.

Soaring land revenues and profits taxes swelled public coffers to a bumper HK$64.9 billion (S$10.48 billion) fiscal surplus, bucking previous government expectations for a deficit.

While Mr Tsang unveiled no major property moves in his address, he pledged to continue bolstering land supply, and earmarked HK$4.5 billion in the coming five years to seek out potential new areas for land reclamation outside of Victoria Harbour "on an appropriate scale" in the densely populated city.

Mr Tsang said 46 sites, including 28 new sites, would be offered for sale in the new fiscal year, that begins on April 1.

Last week, the government announced a new round of property cooling measures including higher stamp duties and home loan curbs to ease some of the world's most expensive home prices.

Asian economies are battling against rising inflation partly caused by hot money flows from loose monetary policies at home and abroad, with governments raising stamp duties and tightening lending in response to the threat of a property bubble.

To lure more private equity funds amid competition with Singapore - that has signed a raft of tax treaties granting exemptions to the industry there - Hong Kong said it would extend profits tax exemption for offshore funds to include transactions in private companies which are incorporated or registered outside Hong Kong.

"This will allow private equity funds to enjoy the same tax exemption as offshore funds," Mr Tsang said.

Hong Kong is also considering laws to allow the Open-ended Investment Company (OEIC) structure for funds popular in mature markets such as the United Kingdom. Investment funds established in Hong Kong can only take the form of trusts presently.

The OEIC structure, allowing managers to create and redeem shares when money is invested or pulled out, scores over trusts by being cost effective as well as faster to launch products.

"The OEIC proposal is a direct response to Singapore moving ahead as a choice of fund domicile but is more problematic as alternative managers probably want other structures as well,"said analyst Philippa Allen, head of ComplianceAsia Consulting.

The government also said it would expand the size of its government bond programme from HK$100 billion to HK$200 billion in the next five years, while proposing a new inflation-linked retail "iBond" issue worth HK$10 billion.

Authorities granted a relatively modest corporate tax rebate of 75 per cent for the 2012-13 financial year with a ceiling of HK$10,000 per business.

Individuals, meanwhile, would also enjoy a salaries tax reduction of up to HK$10,000 for the same period.

In terms of relief measures, with Hong Kong facing one of Asia's worst income gaps, Mr Tsang pledged an extra HK$8.3 billion for elderly allowances, while an extra HK$15 billion would be injected into a community poverty alleviation fund.

Public housing rents would also be waived for two months and electricity subsidies of HK$1,800 to every household.

The relief measures, involving a total of $33 billion, will help to ease the pressure on the middle class, grass roots and SMEs, Mr Tsang said.