Hong Kong will give out more cash vouchers to consumers this year, Financial Secretary Paul Chan said in his annual budget speech, as the government looks to spur demand with loose fiscal policy intended to help the city’s recovery.
(Bloomberg) — Hong Kong will give out more cash vouchers to consumers this year, Financial Secretary Paul Chan said in his annual budget speech, as the government looks to spur demand with loose fiscal policy intended to help the city’s recovery.
Eligible residents will receive HK$5,000 ($637) as part of the voucher program, Chan said Wednesday, as he outlined the city’s budget for the 2023-2024 fiscal year.
The surprise announcement — economists mostly expected the city to refrain from more cash handouts — came as Chan said the city will run yet another fiscal deficit this year to support the economy. He flagged “this is still a deficit budget,” a contrast with predictions among economists for at least a slight surplus in the new fiscal year.
“Overall, we will take a moderately liberal fiscal stance this year,” Chan said.
Financial markets were little changed during the speech, with the Hang Seng Index last trading up 0.3%.
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Chan also forecast an expansion between 3.5% and 5.5% for 2023, he said in an outline of the budget for the new fiscal year. Gross domestic product shrank 3.5% in 2022, a figure confirmed by revised data.
The economy will still face pressure from weakening global growth, which will continue to hurt the city’s exports, Chan said. He added, though, that China’s reopening and improving domestic sentiment will help private consumption.
The city is looking to kickstart its economy as it sees rising competition from Singapore to be Asia’s top destination for business, talent and capital.
The path forward is tough. The economy shrank in three of the past four years as global demand slowed, interest rates rose and the city experienced a protracted exit from Covid curbs that hurt confidence and led to a population exodus.
Consulting firm Deloitte has estimated that the city’s budget shortfall for the 2022-2023 fiscal year reached HK$125.7 billion ($16.1 billion). While the city has enough of a cushion to cover itself from any shortfall in the short term, any prolonged drop in reserves puts future government spending at risk and increases the chance of more borrowing or tax hikes.
Other highlights of the budget speech so far:
- Headline inflation is forecast to reach 2.9% this year
- GDP growth from 2024-2027 will average 3.7% a year
–With assistance from Richard Frost and James Mayger.
(Updates to include consumption voucher announcement.)
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