Hong Kong to spend US$15.4 billion to stabilise virus-ravaged economy

Hong Kong to spend US$15.4 billion to stabilise virus-ravaged economy

Hong Kong skyline economy buildings
Residential and commercial buildings in the Kowloon district with the skyline of Hong Kong Island past Victoria Harbour in the distance. (Photo: AFP/Anthony Wallace)

HONG KONG: Hong Kong will introduce HK$120 billion (US$15.4 billion) in fiscal measures to help businesses and residents impacted by the coronavirus pandemic, as it looks towards economic growth later this year following a recession in 2020.

The measures — which include tax relief, loans for the unemployed and consumption vouchers — are aimed at stabilising the economy, said Hong Kong Finance Minister Paul Chan in a Budget speech on Wednesday (Feb 24).

He forecast the economy is set to grow 3.5 per cent to 5.5 per cent this year, compared to the economic contraction of 6.1 per cent in 2020.

The Budget for 2021 “aims to alleviate the hardship and pressure caused by the economic downturn and the epidemic,” Chan said.

The city's recovery hopes are now pinned on coronavirus vaccines. Often-violent protests and US-China trade tensions in 2019 had plunged the global financial hub into recession even before the pandemic hit.

US-China tensions and uncertainty related to how a game-changing national security law introduced last year could affect non-Chinese investment appetite in the global financial hub remain significant risks for the recovery, analysts say.

Hong Kong begins its vaccine roll-out this week, having secured a total of 22.5 million doses of COVID-19 vaccines from Pfizer, Sinovac and AstraZeneca, lagging other developed cities.

READ: Hong Kong economy shrank a record 6.1% in 2020

READ: Hong Kong is not politicising any COVID-19 vaccine, says health chief

Unemployed residents can get loans capped at HK$80,000 in a programme that postpones payments for the first year and charges 1 per cent interest. The measures come after Hong Kong last week reported a 7 per cent jobless rate between November and January, the highest since April 2004.

Vouchers worth HK$5,000 will also be issued in instalments to residents to boost consumption. Businesses and individuals will also receive tax relief.

Chan told legislators he expected the budget deficit for the upcoming year to hit HK$101.6 billion, smaller than the record HK$257.6 billion expected for FY2020/21.

Pandemic relief measures, including cash handouts to residents and tax breaks and other benefits to businesses, left the city with a much deeper deficit last year than the planned HK$139.1 billion.

On the revenue side, the government will increase the stamp duty for stock trading to 0.13 per cent from 0.1 per cent.

Hong Kong usually runs balanced budgets or surpluses, since its pegged currency system commits it to fiscal prudence. Its fiscal reserves are expected at HK$902.7 billion at the end of March 2021 and fall to HK$775.8 billion by end-March 2026.

Source: Agencies/ic

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