- Hong Kong Finance Secretary Paul Chan struck a positive tone during his budget speech on Wednesday as he revealed measures to boost economic recovery from the Covid-19 pandemic, as well as incentives to help businesses and the residents.
- Chan said the city has been in the early stages of recovery since lifting most of its strict Covid measures late last year.
- As part of fiscal incentives, Hong Kong will distribute vouchers worth HK$5,000 ($637) per person to all adults this year. This compares to HK$10,000 for the previous round in 2022.
Pedestrians walk past shops in Hong Kong, China, Saturday Oct. 15, 2022. Hong Kong aims to become an international hub for virtual assets as the city seeks to bolster its status as a global financial center following disruptions caused by the pandemic. Photographer: Lam Yik/Bloomberg via Getty Images
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Hong Kong Finance Secretary Paul Chan struck a positive tone during his budget speech on Wednesday as he revealed measures to boost economic recovery from the Covid-19 pandemic, as well as incentives to help businesses and the residents.
Chan said the city has been in the early stages of recovery since lifting most of its strict Covid measures late last year.
“I believe Hong Kong’s economy will visibly recover this year, and I remain positive,” Chan said during his budget speech. “However, the economic recovery is still in its infancy and it is necessary that our people and our businesses regain strength.”
Hong Kong’s economy is expected to rebound 3.5% to 5.5% in 2023, after shrinking 3.5% in 2022, Chan said.
In January, the global financial hub reopened its borders with mainland China for the first time in three years.
Hong Kong closely followed China’s strict zero Covid policy until mid-2022, when the city began easing some of the restrictions. In December, the Asian financial center dropped almost all of its Covid requirements.
“Domestically, the outbreak of the fifth wave of the epidemic early last year and the tightening of financial conditions weighed heavily on domestic demand,” Chan said on Wednesday.
“Nevertheless, with the stabilization of the local epidemic situation and the government’s countercyclical measures and the disbursement of consumer vouchers having key impacts, employment conditions have continuously improved.”
As part of fiscal incentives, Hong Kong will distribute vouchers worth HK$5,000 ($637) per person to all adults this year. This is half of what the government gave in the previous budget in 2022 – or HK$10,000.
The Financial Secretary also announced measures to reduce payroll tax by 100%, capped at HK$6,000. This amount is lower than the ceiling set for the previous budget.
Some economists have previously raised questions about the effectiveness of subsidies in stimulating economic recovery.
Still, William Ma of Grow Investment Group, said these measures will certainly help boost domestic consumption.
“I think the HK$5,000…isn’t (what) everyone was expecting. And second, plus the HK$6,000 tax cut – all of that combined I believe (will) create good momentum for the recovery of domestic consumption in (the first and second quarter),” Ma told CNBC’s “Street Signs Asia” on Wednesday.
Hong Kong’s finance chief also revealed plans to submit a legislative proposal in the second half of this year that will impose a minimum tax rate of 15% on multinational companies with a worldwide turnover of at least ( nearly $800 million) from 2024-25.
While cost pressures are expected to increase along with the economic recovery, Chan predicted that headline inflation in 2023 will be 2.9%.
Still, he noted that in the medium to long term, Hong Kong’s economy will see “abundant opportunities.”
The government has estimated that Hong Kong will experience a budget deficit of HK$139.80 billion for the fiscal year 2022-23. This is more than its initial expectation of around HK$56 billion.
Fiscal reserves will likely fall to HK$817.3 billion by the end of the fiscal year ending March 31, Chan said.
– CNBC’s Lim Hui Jie contributed to this report