Hong Kong announces budget to lift economy out of Covid recession

A man in a protective mask stands on Kowloon’s Tsim Sha Tsui waterfront, across from Hong Kong’s Victoria Harbor.

Anthony Wallace | AFP | fake images

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

“Hong Kong has been through tribulations in the last two years,” Hong Kong Finance Secretary Paul Chan said in his budget speech on Wednesday.

“With the epidemic still lingering, 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 escalated in 2018, months of pro-democracy protests in 2019, and the ongoing pandemic.

Over the past year, the government increased spending to help businesses and households cope with the challenges posed by the Covid-19 pandemic. But that has also brought the fiscal budget to a record level, Chan said.

For the next financial year beginning in April, Chan announced measures that include the following:

  • About HK $ 8.4 billion ($ 1.1 billion) for the procurement and administration of Covid-19 vaccines.
  • Approximately 9.5 billion Hong Kong dollars ($ 1.2 billion) in measures to support businesses, including a reduction in income tax and exemption from business registration fees.
  • For individuals, the support includes a reduction in wage tax, loan guarantees and consumer vouchers worth HK $ 5,000 ($ 645) for each eligible resident.

Economic outlook

Hong Kong’s economy contracted 6.1% in 2020, accelerating from the 1.2% contraction the previous year, official data showed.

Chan said the city’s economy will grow again this year. He said GDP is expected to expand by 3.5% to 5.5% this year, and an average of 3.3% each year between 2022 and 2025.

But 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 tourism activities take time to return to normal, the economy will still face significant challenges in the first half of the year,” he said in his budget speech.

Hong Kong started its Covid vaccination program this week. The government said last week that it has purchased a total of 22.5 million doses of the Covid vaccine, “enough” for everyone in the city.

With a population of around 7.5 million, Hong Kong has reported more than 10,890 cases of the coronavirus and 197 deaths as of Tuesday, official data showed.


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