A man wearing a protective face mask stands on Kowloon’s Tsim Sha Tsui waterfront across from Victoria Harbor in Hong Kong.
Anthony Wallace | AFP | Getty Images
The Hong Kong government will spend more than $ 120 billion (US $ 15.5 billion) in the coming fiscal year to boost its two-year recession economy.
“Hong Kong has struggled for the past two years,” said Hong Kong Finance Secretary Paul Chan in his budget address on Wednesday.
“With the epidemic still going on, 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 quarters of straight contractions after multiple crises, including the US-China trade war escalating in 2018, months of protests against democracy in 2019 and the ongoing pandemic.
Record budget deficit
Over the past year, the government increased its spending – partly funded by cutting its tax reserves – to help businesses and households cope with the challenges of the Covid-19 pandemic.
It also pushed the budget deficit to a record high of 257.6 billion Hong Kong dollars ($ 33.2 billion) in the current fiscal year, which ends 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 actions that will include the following for the coming year starting April:
- Approximately $ 8.4 billion Hong Kong dollars ($ 1.1 billion) to source and administer Covid-19 vaccines.
- Approximately Hong Kong $ 9.5 billion (US $ 1.2 billion) worth of business support measures, including a reduction in corporate income tax and a waiver of corporate registration fees.
- For individuals, support includes payroll tax reductions, loan guarantees, and consumption vouchers valued at 5,000 Hong Kong dollars (US $ 645) for each eligible resident.
Hong Kong’s fiscal reserves are projected to be Hong Kong dollars 902.7 billion (US $ 116.4 billion) by the end of March and, according to official estimates, could reach around Hong Kong 801.1 billion (US $ 103.3 billion) in one year Dollar).
Hong Kong’s economy contracted 6.1% in 2020 – up from a 1.2% decline a year earlier, official data showed.
Chan said the city’s economy will grow again this year. He said GDP is expected to grow by 3.5% to 5.5% this year and an average of 3.3% per year from 2022 to 2025.
However, the progress of the economic recovery this year “will depend on the development of the epidemic,” said the finance secretary.
“As the cross-border movement of people and tourist activities takes time to get back to normal, the economy will still face major challenges in the first half of the year,” he said in his budget speech.
Hong Kong launched its Covid vaccination program this week. The government said last week it bought a total of 22.5 million doses of Covid vaccine – “enough” for everyone in the city.
With a population of around 7.5 million, Hong Kong reported more than 10,890 cases of the coronavirus and 197 deaths on Tuesday, official data showed.