Hong Kong unveils HK$761 billion budget in bid to boost post-Covid recovery

Hong Kong’s finance chief unveiled a HK$761 billion (US$97 billion) budget on Wednesday, plunging into the coffers to pay for the recession-hit city’s post-Covid recovery.

Hoping to kickstart the finance centre’s economy, Finance Secretary Paul Chan announced tax cuts and more consumer spending vouchers.

Hong Kong’s leaders are keen to resuscitate its fortunes after posting recessions in three of the past four years — a tumultuous period that saw the economy battered by protests, virus controls and Beijing’s authoritarian crackdown.

While rival financial hubs reopened to the world long ago, Hong Kong only fully emerged from pandemic isolation earlier this month when it restored its border with mainland China, its main economic pipeline.

“Our economy is at the early recovery stage, and members of the public as well as a large number of enterprises are still weighed down by tremendous pressure and require support,” Chan told legislators while announcing his 2023/24 budget.

The latest blueprint for reversing the downturn allocates HK$5,000 (US$637) handouts for more than six million people, half last year’s amount as Chan is under pressure to rein in fiscal spending.

Other measures include salary tax breaks, welfare allowances and a “Happy Hong Kong” campaign aimed at making the city more enjoyable with food fairs.

The budget will push the city’s books into the red for a second consecutive year, but by less than some forecasters initially feared, with an estimated deficit of HK$54.4 billion.

Over the past three years, Hong Kong splashed out more than HK$600 billion on pandemic relief efforts.

Covid-19 testing booths. Photo: Kyle Lam/HKFP.

The upcoming expenditures would bring one of the world’s largest fiscal reserves down to around HK$763 billion ($97 billion), about half of what it was before the pandemic.

Betting on a rebound

On its path to recovery, Hong Kong has made restoring its business-friendly reputation and reversing an exodus of both expatriate and local workers top priorities.

In three years, the city’s workforce has lost more than 200,000 people.

Andy Kwan, of the ACE Centre for Business and Economic Research, warned that Hong Kong might spiral into a structural deficit if it fails to correct course.

airport departures immigration emigration — Hong Kong International Airport in July 2022 amid the Covid-19 pandemic. File photo: Tom Grundy/HKFP.

“Medium- to long-term government revenue will be affected because both the economic growth and salaries tax will be undermined when quantity and quality of young labour worsens,” Kwan told AFP.

To pull in more talent, Chan announced a capital investment scheme and reiterated measures first proposed by city leader John Lee in his maiden policy address last year, including relaxed visa rules for high-earners and elite university graduates.

Desperate for crowds to return and inject cash into the moribund economy, Chan unveiled a new loan pool of HK$2.7 billion for passenger transport operators and licensed travel agents.

The move builds on a charm offensive launched this month, with the government offering half a million free flights and ramping up publicity.