HONG KONG- Hong Kong will offer tax breaks, handouts and subsidies to small businesses and residents, to mitigate the impact of the most stringent social restrictions imposed in the city to curb the spread of COVID-19, Finance Secretary Paul Chan said.
The 2022/23 budget proposals were announced as hundreds of bars, restaurants and small retailers warned they were months away from closure, and shopping malls were deserted while the city endured its worst COVID-19 outbreak so far.
“Hong Kong is currently experiencing its hardest time in the fight against the epidemic, and we are facing enormous challenges,” Chan told legislators via videoconference on Wednesday.
Total spending in 2022/23 was estimated at HK$807.3 billion ($103.47 billion) and revenues were estimated at HK$715.9 billion, returning Hong Kong’s budget to a deficit after a HK$18.9 billion surplus in 2021/22.
Hong Kong usually runs balanced budgets or surpluses, since its pegged currency system commits it to fiscal prudence, but still has ample reserves.
Fiscal reserves are estimated at HK$940 billion at the end of the government’s current term in June, and are expected to grow above HK$1 trillion in the coming five years.
Chan said “countercyclical measures” in the budget to support the economy totaled more than HK$170 billion, with spending on anti-epidemic measures put at more than HK$54 billion.
The global financial hub has doubled down on its “dynamic zero COVID” strategy, which aims to eradicate all outbreaks, following mainland China’s lead even as the rest of the world adjusts towards “living with the virus.”
Given the city is facing thousands of infections a day and the numbers are growing, some analysts predict at least one or two quarters of economic contraction after recovering last year from the city’s most prolonged recession in 2019-2020.
Bars, gyms, beauty parlors and 12 other types of venues are closed, while restaurants cannot operate beyond 6.00 pm. Apart from grocery stores, most shops are deserted as residents are back working from home. The border is virtually shut with the finance sector complaining this has caused an exodus of talent and made operating a regional hub out of Hong Kong difficult. — Reuters
