Hong Kong Financial Secretary Paul Chan (陳茂波) outlined new support measures for consumers and the unemployed as an escalating COVID-19 outbreak takes a toll on the territory’s economy.
The Hong Kong government would give HK$10,000 (US$1,282) in spending vouchers to eligible residents, Chan said in his budget speech yesterday, while also earmarking HK$20 billion for “other potential anti-epidemic” needs.
The economy is being battered by an outbreak of the Omicron variant of SARS-CoV-2 that has caught officials off guard.
Photo: AFP
With daily COVID-19 cases topping 9,000, the government has banned travel from several countries, closed schools and restricted dining at restaurants. Stricter measures could be on the cards, including a possible territory-wide lockdown, which would be unprecedented, causing further damage to businesses and jobs.
Economic growth would slow to 2 to 3.5 percent this year from 6.4 percent last year, Chan said.
The economy last year rebounded after two previous years of contraction.
While Hong Kong’s unemployment rate of 3.9 percent and per-capita income of US$49,000 look good “these figures do not allow us to see clearly many issues, such as unbalanced economic development and that many young people cannot fulfill their aspirations,” Chan said.
The additional spending measures would mean that the government’s budget would have a deficit in the coming fiscal year beginning April 1, Chan said, but did not disclose how big it would be.
For the current fiscal year, Hong Kong would post a surplus of HK$18.9 billion, he said, compared with an originally forecast deficit of HK$101.6 billion.
The surprise outcome was largely due to higher-than-expected revenue as a result of land sales and profit taxes, he said.
Adding to the economy’s woes are likely higher borrowing costs for businesses and consumers.
Hong Kong would be forced to increase interest rates along with the US Federal Reserve, as the territory’s currency is tied to the US dollar.
Several major banks, including Goldman Sachs Group Inc and Morgan Stanley, have downgraded Hong Kong’s growth outlook for the year.
While the previous rounds of spending vouchers have had “visible effects in supporting services performance,” economic growth would still be affected by the worsening COVID-19 outbreak, IHS Markit economics associate director Pan Jingyi (潘婧怡) said.
IHS’ purchasing managers index for Hong Kong showed that the private sector fell into contraction at the start of this year, she said, adding that the firm downgraded Hong Kong’s growth forecast to 2.3 percent this year.
Separately, Chan said that Hong Kong is considering easing some requirements for large, advanced technology firms that are thus far not eligible for listings to help them meet capital needs for research and development (R&D).
The Hong Kong Securities and Futures Commission (SFC) and Hong Kong Exchanges & Clearing Ltd (HKEX) are reviewing the main board listing rules, such as the profit and trading record requirements, to revise them to meet the fundraising needs of “large-scale advanced technology enterprises,” Chan said.
The SFC and HKEX are in the early stages of exploring whether Hong Kong’s listing regime might accommodate “sizeable pre-profit or pre-revenue companies involved in capital-intensive advanced technology R&D, recognizing the risks that arise in relation to businesses which have no or limited sales,” an SFC spokesperson said.
HKEX chief executive officer Nicolas Aguzin also welcomed the proposal in an e-mailed statement.
Chan said that a working group formed by HKEX, the SFC and the Hong Kong Monetary Authority has completed its feasibility study on allowing yuan-denominated stocks to be traded via the southbound Stock Connect.
They would start discussion with mainland Chinese authorities, as the Hong Kong government is prepared to support the scheme with measures such as waiving stamp duty on stock transfers paid by market makers to boost liquidity.
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