HK govt records first deficit in 15 years amid economic slump

29 Février, 2020, 01:18 | Auteur: Anatole Charbonneau
  • Hong Kong's economy is reeling from the US-China trade war months of seething pro-democracy protests last year and now the coronavirus

Hong Kong Financial Secretary Paul Chan announced a HK$120 billion (US$15.4 billion) relief package with tax cuts and a cash handout, in an effort to shore up economic confidence in a city battered by political unrest and the coronavirus.

The situation is expected to worsen.

Meanwhile, Hong Kong's GDP in 2019 was down 1.2 percent from the previous year, and the lowest since 2009.

Chan said the city was set to record a record high deficit this year - its first in 15 years. "The outlook is far from promising in the near term".

Chan also announced in his speech that Hong Kong's budget deficit is expected to spike to around $18 billion by 2021, according to the BBC.

The financial secretary said during a budget presentation that Hong Kong's economy has been "dragged by a host of headwinds" that percolated past year, including fallout from months of mass protests, the ongoing US-China trade war and the slowing global economy.

Hong Kong remains home to the largest number of initial public offerings by mainland firms, and mediates almost two-thirds of direct investment both into and out of China, according to a report by Hong Kong Watch, an advocacy group.

As well as the cash payout to around seven million people - a move which will cost around HK$71bn (€8.37bn) in total - one month's rent will be paid for lower-income tenants living in public rental housing.

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Those issues pushed Hong Kong into recession, with the economy shrinking 1.2% overall a year ago, marking its first annual decline since the global financial crisis.

Some of the money for the relief package will come from a special fund that has been established "in view of the deteriorating economic and employment conditions as a result of the novel coronavirus epidemic", Chan said.

Public discontent over growing influence from Beijing has fuelled the protests, which were sparked by a now withdrawn proposal to allow Hong Kong citizens to be extradited to stand trial in mainland Chinese courts.

The projected shortfall, which was larger than most analysts expected, accounts for lower revenues, as well as another HK$120bn in mostly one-off relief measures, including handouts of HK$10,000 to Hong Kong residents aged over 18, tax breaks for firms and other subsidies.

The economy has been in recession for at least three quarters and many companies in tourism and retail are struggling to survive as a partial closure of the border reduces visitors to a trickle and keeps residents away from public areas.

Despite the ongoing challenges, Chan said he believes the economy will be able to bounce back in the long term.

"Whether this stimulus will be sufficient to pull Hong Kong SAR out of the recession that commenced in 2019 will depend on the severity and duration of the COVID-19 epidemic", Rajiv Biswas, APAC Chief Economist at IHS Markit told Al Jazeera.

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