Hong Kong Plans $15bn Spending to Support Economy

Date: 26 February 2020 - 22:15

News ID: ۷۶۶۱۱

WASHINGTON (CNBC) - The Hong Kong government has announced 120 billion Hong Kong dollars ($15.4 billion) worth of measures to support its economy, which has been dragged down by pro-democracy protests and the new coronavirus outbreak.
That planned spending would result in "an all-time high” fiscal deficit of 139.1 billion Hong Kong dollars, or around 4.8% of gross domestic product, Hong Kong’s Financial Secretary Paul Chan said in his budget speech on Wednesday.
"Since January 2020, Hong Kong has come under the threat posed by the novel coronavirus outbreak, which further dealt a blow to the economy. We must take decisive measures to tackle the situation,” he said, according to an official translation of his Cantonese speech.
Chan outlined measures to help businesses, workers and households weather additional economic challenges posed by the virus outbreak. They include:
•    Low-interest loans for small- and medium-sized enterprises, with government guarantee
•    A reduction in profits tax by 100%, subject to a ceiling to $20,000
•    Cash payout of 10,000 Hong Kong dollars to permanent residents age 18 and above
But the financial secretary warned that "one-off relief measures” may have to be "progressively reduced” in the coming years as the government’s expenditure is growing larger.
The planned deficit for the coming financial year starting in April is much larger than the $37.8 billion fiscal shortfall expected in the current financial year — the Hong Kong government’s first deficit in 15 years.
"The deficits are mainly caused by the fact that government revenue cannot keep up with drastic increases in government expenditure, especially recurrent expenditure,” said the financial secretary.
He explained that Hong Kong’s fiscal reserves of about 1 trillion Hong Kong dollars have allowed the government "to roll out special measures amid the prevailing economic downturn, such as paying out cash.” But over the longer term, the government must grow the economy and find new sources of revenue, he added.