The Hong Kong government expects to record a deficit of HK$140 billion in 2022-23, more than double the HK$56 billion initial estimate.

Finance Secretary Paul Chan
Finance Secretary Paul Chan delivers the 2023 budget. Photo: Kyle Lam/HKFP.

The estimated fiscal deficit was revealed by Financial Secretary Paul Chan when he delivered the budget for the upcoming fiscal year at the Legislative Council on Wednesday.

Chan also forecast a HK$54.4 billion deficit for the 2023-24 fiscal year, which would leave fiscal reserves at HK$762.9 billion, or 12 months of government spending.

According to the finance minister, the estimated government income for 2022-23 was HK$638 billion, 15.7 per cent lower than the finance chief’s original prediction last year.

Chan said the drop in revenue was due to land being sold at lower than expected prices and the shrink in stamp duty income because of a weaker than predicted stock market.

Meanwhile, the total government expenditure of HK$809.6 billion in 2022-23 was 16.8 per cent more than the previous year.

“With the massive expenditure incurred by the 2022 Employment Support Scheme launched after the announcement of the last Budget and the anti-epidemic measures taken last year, the financial position of this financial year was worse than expected,” Chan said.

Central Business Cityview
File photo: Kyle Lam/HKFP.

As a result, the city’s fiscal reserves dropped to HK$ 820 billion from HK$957 billion in March 2022.

In the coming fiscal year, Chan said the government would reduce its total spending by 6 per cent to HK$761 billion.

‘Visible rebound’

The financial secretary predicted that Hong Kong’s economy would see a “visible rebound” this year with a 3.5 to 5.5 per cent overall growth.

Chan said while the economic growth of the US and Europe is expected to further slow this year, he expected “the accelerated growth of the mainland [China] economy.” The removal of restrictions on cross-boundary truck transportation “should alleviate part of the pressure” on Hong Kong’s exports of goods, he added.

As for services, Chan said Hong Kong could expect to see a “strong rebound” in visitor arrivals in 2023 as normal travel to and from mainland China has resumed and all quarantine requirements have been removed.

The Hong Kong Tourism Board estimated that Hong Kong would record 25.8 million visitor arrivals this year, which is over 41 times more than year’s count, but less than half of the 55.9 million visitor arrivals the city welcomed in 2019 before the Covid-19 pandemic.

mtr lok ma chau covid reopening
Hong Kong’s border with China was reopened on Sunday, January 8 as travellers made the cross-border trip at Lok Ma Chau MTR station. File photo: Kyle Lam/HKFP.

Additionally, the financial chief forecast that public consumption would increase as “overall economic sentiment” improves, exchanges between Hong Kong and mainland China resumes, and the world returns to normalcy.

From 2024 to 2027, Chan estimated that Hong Kong’s economy would see annual growth of 3.7 per cent, higher than 2.8 per cent growth per year in the pre-pandemic decade.

The financial secretary said his forecast was based on Hong Kong’s “unique” advantages under One Country, Two Systems, the government’s increasingly active role in improving the city’s competitiveness, and the continued resumption of economic activities after the pandemic.

Higher inflation

In 2022, Hong Kong saw a 1.7 per cent hike in its underlying inflation rate, not counting the government’s one-off measures.

Chan said while individual items such as food, energy, and clothing saw more notable price rises, rents for private housing fell and the price pressures on other components were largely contained.

The finance chief forecast that inflation would climb to 2.5 per cent in the upcoming fiscal year due to economic recovery and “external price pressures.”

The 2023 Budget in full:

YouTube video
YouTube video
budget summary 2023

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Peter Lee is a reporter for HKFP. He was previously a freelance journalist at Initium, covering political and court news. He holds a Global Communication bachelor degree from CUHK.