Hong Kong announces budget to boost economy from Covid recession

A man wearing a protective mask stands on the waterfront of Tsim Sha Tsui in Kowloon, facing Victoria Harbor in Hong Kong.

Anthony Wallace | AFP | Getty Images

The Hong Kong government will spend more than HK $ 120 billion ($ 15.5 billion) next year to recover the economy, which has been in a recession for two years.

“Hong Kong has experienced hardships in the last two years,” Hong Kong Treasury Secretary Paul Chan said in a budget speech Wednesday.

“Our economy is still in recession as the epidemic is still going on,” he said. Official English translation Of his Cantonese speech.

Hong Kong’s economy has shrunk for the sixth straight quarter after fighting multiple crises, including the intensifying US-China trade war in 2018, months of opposition to democracy in 2019, and an ongoing pandemic.

Record a budget deficit

Over the past year, the government has increased partially funded spending by withdrawing financial reserves to help businesses and households address the challenges posed by the Covid-19 pandemic. ..

According to Mr. Chan, this has reached a record high of HK $ 257.6 billion ($ 33.2 billion) for the current fiscal year ending in March.

He added that the budget deficit for the next fiscal year is estimated at HK $ 101.6 billion ($ 13.1 billion). Chan has announced measures including the following for next year starting in April:

HK $ 8.4 billion ($ 1.1 billion) to procure and administer the Covid-19 vaccine.
Measures worth about HK $ 9.5 billion ($ 1.2 billion) to support the business, such as profit tax reductions and exemptions from business registration fees.
For individuals, support includes payroll tax worth HK $ 5,000 ($ 645) per eligible resident, loan guarantees, and reduced consumption vouchers.

Official estimates show that Hong Kong’s financial reserves will reach HK $ 902.7 billion ($ 116.4 billion) by the end of March and could drop to about HK $ 801.1 billion ($ 103.3 billion) a year later.

Economic outlook

According to official data, Hong Kong’s economy shrank 6.1% in 2020. This is accelerating from the 1.2% reduction in the previous year.

Mr Chan said the city’s economy will return to growth this year. He said GDP is expected to grow from 3.5% to 5.5% this year and an average of 3.3% each year from 2022 to 2025.

However, progress in the economic recovery this year “depends on epidemic progress,” the Treasury Secretary said.

“The economy will still face significant challenges earlier this year, as it will take time for cross-border movement and tourism to return to normal,” he said in a budget speech.

Hong Kong launched the Covid vaccination program this week. The government said last week I bought a total of 22.5 million Covid vaccines. This is “enough” for everyone in the city.

According to official data, Hong Kong, with a population of about 7.5 million, reported more than 10,890 cases of coronavirus and 197 deaths as of Tuesday.