Hong Kong Govt Unveils HK$170 Bln Counter-Cyclical Measures To Support Growth

(RTTNews) - Hong Kong Financial Secretary Paul Chan on Wednesday unveiled an expansionary budget to support households and businesses so as to stabilize the economy.

In his 2022-23 budget speech, Chan said counter-cyclical measures costing a total of over HK$170 billion, together with spending in infrastructure projects and other items, will boost the economy by around three percentage points.

He earmarked HK$20 billion for other potential anti epidemic needs. "We will provide full support to fight the epidemic should more resources be required."

For 2022-23, the government estimated fiscal deficit of HK$56.3 billion due to the expenses for one-off relief measures and anti-epidemic measures, equivalent to 1.9 percent of GDP. The fiscal balance is expected from 2023/24.

Hong Kong's economy will put up a better performance in the second half of this year and achieve growth of 2 to 3.5 percent in real terms for the year as a whole, Chan said.

Chan forecasts Hong Kong's economy to grow by an average of 3 percent per annum in real terms from 2023 to 2026.

On inflation, he said external price pressures are expected to remain high and persist for some time, while domestic cost pressures will also increase gradually alongside the economic recovery, he said.

The headline inflation is forecast to rise to 2.1 percent this year from 1.6 percent in 2021 and the underlying rate at 2 percent in 2022, up from 0.6 percent last year. Chan announced a new round of consumption voucher scheme, under which electronic consumption vouchers with a total value of HK$10,000.

He reduced salaries tax and tax under personal assessment for the year of assessment 2021/22 by 100 percent, subject to a ceiling of HK$10,000.

For easing the operating pressure of business, he cut profits tax by 100 percent, subject to a ceiling of HK$10,000. He also waived the business registration fees for 2022 23.

The expansionary budget unveiled today will provide some support to Hong Kong's economy this year, Sheana Yue and Julian Evans-Pritchard, economists at Capital Economics, said.

But this is unlikely to fully offset the drag from Fed rate hikes, let alone the massive hit to economic activity from a citywide lockdown, which looks increasingly likely, the economists said.