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Hong Kong unveils USD22B budget for virus plagued economy

HONG KONG (AFP) – Hong Kong’s finance chief yesterday unveiled a costly HKD170 billion (USD21.79 billion) budget, including tax breaks and consumer spending vouchers, as the city reels under its worst coronavirus outbreak to date.

While rival finance centres emerging from pandemic isolation and re-opening to the world, Hong Kong has found itself overwhelmed by the highly infectious Omicron variant.

The surge has prompted the reimposition of painful curbs that have shuttered many businesses, closed schools, pushed authorities to order multiple rounds of mass testing and compounded the city’s international isolation. Finance Secretary Paul Chan released the taps in his 2022/23 budget speech with a series of handouts.

“Our economy and people’s livelihoods have been under immense pressure in recent months,” he told legislators in a speech that was live streamed because of the pandemic.

“Economic performance in the first quarter is not optimistic.”

Among the measures are HKD10,000 electronic spending vouchers for some 6.6 million people, double the amount offered last year. As with previous rounds, the vouchers will not be available to foreign domestic workers or non-permanent residents.

The budget also included salary tax reductions, electricity bill subsidies and the continuation of a loan scheme for small and medium businesses.

Hong Kong’s economy fell into a recession in 2020 thanks to the emergence of the coronavirus.

It rebounded in 2021 with growth of 6.4 per cent as zero-COVID largely kept the virus at bay. But that recovery now looks shaky.

Fitch Ratings recently slashed Hong Kong’s 2022 growth forecast from three per cent to 1.5 per cent, making the city among the worst-performing economies worldwide.

Chan offered a more optimistic take in his budget speech.

“I forecast that Hong Kong’s economy will put up a better performance in the second half of this year and achieve growth of 2.0-3.5 per cent in real terms for the year as a whole,” he said.