Hong Kong to spend USD15.4B to stabilise virus-ravaged economy

HONG KONG (AP) — Hong Kong will introduce HKD120 billion (USD15.4 billion) in fiscal measures to help businesses and residents impacted by the coronavirus pandemic, as it looks towards economic growth later this year following a recession in 2020.

The measures — which include tax relief, loans for the unemployed and consumption vouchers — are aimed at stabilising the economy, Hong Kong Finance Minister Paul Chan said in a budget speech yesterday. He forecast the economy is set to grow 3.5 per cent to 5.5 per cent this year, compared to the economic contraction of 6.1 per cent in 2020.

The budget for 2021 “aims to alleviate the hardship and pressure caused by the economic downturn and the epidemic”, Chan said.

Unemployed residents can get loans capped at HKD80,000 in a programme that postpones payments for the first year and charges one per cent interest. The measures come after Hong Kong last week reported a seven per cent jobless rate between November and January, the highest since April 2004.

Vouchers worth HKD5,000 will also be issued in installments to residents to boost consumption. Businesses and individuals will also receive tax relief.

Hong Kong Finance Minister Paul Chan attends a press conference on budget for 2021-22 yesterday. PHOTO: AP

Chan said that Hong Kong’s fiscal deficit is at a record high, after the government last year spent HKD300 billion on supporting measures, including a cash handout to residents, tax breaks and wage subsidies for businesses.

To help replenish tax coffers drained by the extra spending and weak economy, the government will raise the stamp tax on stock trading to 0.13 per cent from 0.1 per cent as of August 1, Chan said.

That caused shares in the company operating the local bourse, Hong Kong Exchanges & Clearing Ltd, to fall as much as 12.4 per cent yesterday. The benchmark Hang Seng index fell three per cent, to 29,718.24.

Chan said Hong Kong, a semi-autonomous Chinese territory, would benefit from mainland China’s “fundamentally sound” economy, despite uncertainties from the epidemic and in United States (US)-China relations.

“In the medium term, Hong Kong will continue to benefit from the ongoing development of the mainland and the shift in global economic gravity from West to East,” Chan said.