HK pushes HK$137.5-b stimulus to avoid 'massive layoffs'


  • AseanPlus News
  • Thursday, 09 Apr 2020

Convener of the Executive Council Bernard Chan talks to China Daily during an interview on Aug 14, 2017. - China Daily

HONG KONG (Bloomberg): One of the main focuses of the latest stimulus package announced by the Hong Kong government is to help people keep their jobs and potentially create some as well, said convener of the Executive Council Bernard Chan.

"The last thing we want is to have massive layoffs, ” Chan, also a senior adviser to Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor said in an interview with Bloomberg Television on Thursday (April 9).

"What was announced yesterday was to help employers think twice. You can imagine the economic forecast is very bad, so many companies are looking for ways to trim their workforce or downsize."

Lam announced a fresh stimulus package worth about HK$137.5 billion (US$17.7 billion) to support the city’s deteriorating economy amid the coronavirus outbreak, with a main focus on job retention.

The spending package will include an HK$80 billion job security programme to subsidize 50 per cent of wages for affected workers for six months, Lam said in a press conference Wednesday evening. Lam and other key officials will reduce their salaries by 10 per cent for one year.

The Hong Kong Monetary Authority will “adjust regulatory parameters” to enable banks to lend more, releasing a total lending capacity of HK$1 trillion, as well as other sector-specific measures to boost liquidity, according to a government document.

“As we are facing an unprecedented challenge, the government has to respond in an unprecedented manner, ” Lam said Wednesday.

The government intends to distribute the cash in two batches, one starting in June and the other from September, Chan said.

If the situation continues to deteriorate, the Hong Kong government will have to step in to do more, just as other governments will, he added.

Hong Kong is also likely still months away from considering an exit plan from the current crisis given the uncertain nature of the virus, he said.

“Still many months away before talking about a return to normalcy, ” he said.

“How do we know for sure the rest of the world is safe enough for us to welcome them back?”

The Hong Kong government has been under pressure to add more support for an economy that had already slid into recession following months of social unrest and now faces shutdowns to curb the virus outbreak.

In February, the government announced a HK$30 billion anti-epidemic fund and a HK$120 billion relief package in the annual budget centred on a HK$10,000 handout to all permanent residents age 18 and above.

Other key measures:

> Job security payments will be capped at HK$9,000 per individual for six months. The payments are expected to be made no later than June and about 1.5 million residents would benefit

<> HK$21 billion for a dozen measures across various targeted sectors including the aviation and tourism industries

> 30,000 jobs will be created including civil-service positions and internships

> Tenants of government properties will have a 75 per cent reduction in rent

> Registration fees for medical workers will be waived

> Government to ask transit operator MTR Corp to cut fares by 20 per cent for six months

“This will be a step up by the government to help SMEs to survive and to hopefully prevent a mass wave of unemployment and support low-income groups, ” said Tommy Wu, senior economist at Oxford Economics in Hong Kong.

“It looks like this is sizeable enough to cover many workers who have been affected by the virus outbreak.”

The additional spending announced Wednesday almost doubles Hong Kong’s projected budget deficit for the 2020-2021 fiscal year to HK$276.6 billion from an earlier estimate of HK$139.1 billion, Lam said.

This accounts for about 9.5 per cent of gross domestic product, she said.

Government reserves are expected to drop to as low as HK$800 billion as a result of the relief measures, Financial Secretary Paul Chan Mo-po said at the press conference Wednesday.

That is equivalent to about 14 to 15 months of government spending, he said. The government’s finances are still sound and there is no immediate plan to issue debt, he added. - Bloomberg

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