HONG KONG: As the Hong Kong government posts its first deficit in more than 15 years, all eyes will be on financial secretary Paul Chan’s budget release today and how he’ll tap cash reserves to stimulate an economy under pressure from months of unrest and the coronavirus outbreak.
Anti-government protests drove the city into recession last year and economists now forecast another slump for 2020, spelling the first back-to-back annual contractions on record. Yet Chan holds a major card that he has largely yet to play: A fiscal reserve that stood at HK$1.12 trillion (US$144bil) as of Dec 31.
One factor that could inform Hong Kong’s response is the big packages announced elsewhere, such as by rival Singapore, which has pledged to post its biggest budget deficit since at least 1997 to combat the impact of the virus. While Hong Kong has historically espoused a conservative fiscal policy, the government has already earmarked an extra HK$30bil in this fiscal year to help those affected by the virus outbreak. “No government wants to be accused of having done too little, ” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis.
So far, the spending measures rolled out to deal with Hong Kong’s downturn have been limited, focusing on helping low-income families and enterprises that have been most hurt by the damaged economy. Chan has so far played down talk of cash handouts, though he said the government wanted to have a “bold” response.
“The government’s resources are always limited, and this budget cannot fully meet everyone’s requirements, ” Chan said in a blog post on Sunday, according to translated text from the Chinese-language post.
In an earlier post describing “tsunami-like” shocks to the economy, Chan appeared to temper expectations by raising concerns about the long-term affordability of stimulus measures given the recent surge in government spending amid the recession. — Bloomberg
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