A man in a protective face mask stands on the Kowloon waterfront in Tsim Sha Tsui, opposite Victoria Harbor in Hong Kong.
Anthony Wallace | AFP | Getty Images
The Hong Kong government will spend more than $ 120 billion ($ 15.5 billion) over the next fiscal year to kick-start its economy, which has been in recession for two years.
“Hong Kong has endured trials for the past two years,” Hong Kong Financial Secretary Paul Chan said in his budget speech on Wednesday.
“With the epidemic still continuing, our economy has yet to come out of recession,” he said, according to an official English translation of his Cantonese speech.
Hong Kong’s economy has suffered six consecutive quarters of contractions after battling multiple crises, including the US-China trade war that intensified in 2018, months of pro-democracy protests in 2019 and the ongoing pandemic.
Record budget deficit
Over the past year, the government has increased spending – funded in part by withdrawing its tax reserves – to help businesses and households cope with the challenges of the Covid-19 pandemic.
That also pushed the budget deficit to a record high of 257.6 billion Hong Kong dollars ($ 33.2 billion) in the current financial year ending in March, Chan said.
The budget deficit for the coming fiscal year is estimated at 101.6 billion Hong Kong dollars ($ 13.1 billion), he added. Chan announced measures that include the following for the upcoming year beginning in April:
- About 8.4 billion Hong Kong dollars ($ 1.1 billion) for the purchase and administration of Covid-19 vaccines.
- About 9.5 billion Hong Kong dollars ($ 1.2 billion) in measures to support businesses, including a reduction in income tax and exemption from corporate registration fees.
- For individuals, support includes a payroll tax reduction, loan guarantees and consumption vouchers worth 5,000 Hong Kong dollars ($ 645) for each eligible resident.
Hong Kong’s fiscal reserves are expected to reach 902.7 billion Hong Kong dollars (116.4 billion dollars) by the end of March, and could fall to about 801.1 billion Hong Kong dollars (103.3 billion dollars) in one year. according to official estimates.
Economic Outlook
Hong Kong’s economy contracted 6.1% in 2020 – accelerating from the 1.2% contraction in the previous year, official data showed.
Chan said the city’s economy will grow again this year. He said GDP is projected to grow by 3.5% to 5.5% this year and an average of 3.3% each year from 2022 to 2025.
But the progress of the economic recovery this year “will depend on the development of the epidemic,” said the financial secretary.
“As cross-border movement of people and tourism activities take time to return to normal, the economy will still face major challenges in the first half of the year,” he said in his budget speech.
Hong Kong has started its vaccination program against Covid this week. The government said last week it has bought a total of 22.5 million doses of Covid vaccine – “enough” for everyone in the city.
With a population of about 7.5 million, Hong Kong reported more than 10,890 cases of the coronavirus and 197 deaths on Tuesday, official data shows.