Hong Kong announces budget to pull economy out of Covid recession

A man wearing a protective mask is standing on the seafront of Tsim Sha Tsui in Kowloon, in front of Victoria Harbor in Hong Kong.

Anthony Wallace | AFP | Getty Images

The Hong Kong government will spend more than 120 billion Hong Kong dollars ($ 15.5 billion) in the next financial year to lift its economy, which has been in recession for two years.

“Hong Kong has been through tribulations for the past two years,” Hong Kong Finance Secretary Paul Chan said in his budget speech on Wednesday.

“With the epidemic still lingering, our economy is not yet out of recession,” he said, according to an official English translation of his Cantonese speech.

Hong Kong’s economy suffered six consecutive quarters of contraction after facing several crises, including the U.S.-China trade war that intensified in 2018, months of pro-democracy protests in 2019 and the ongoing pandemic.

Last year, the government increased spending to help businesses and families address the challenges posed by the Covid-19 pandemic. But it also brought the fiscal budget to a record high, Chan said.

For the next financial year starting in April, Chan announced measures that include the following:

  • About 8.4 billion Hong Kong dollars ($ 1.1 billion) for purchasing and administering Covid-19 vaccines.
  • About 9.5 billion Hong Kong dollars ($ 1.2 billion) in business support measures, including a reduction in tax on profits and exemption from company registration fees.
  • For individuals, support includes a reduction in tax on wages, loan guarantees and consumer vouchers worth 5,000 Hong Kong dollars ($ 645) for each eligible resident.

Economic outlook

Hong Kong’s economy shrank 6.1% in 2020 – accelerating from the 1.2% contraction the previous year, official data showed.

Chan said the city’s economy will grow again this year. He said that GDP is expected to grow 3.5% to 5.5% this year, and an average of 3.3% a year from 2022 to 2025.

But the pace of economic recovery this year “will depend on the development of the epidemic,” said the finance secretary.

“As the movement of people and tourism activities across borders takes time to return to normal, the economy will still face significant challenges in the first half of the year,” he said in his budget speech.

Hong Kong started its Covid vaccination program this week. The government said last week that it bought a total of 22.5 million doses of the Covid vaccine – “enough” for everyone in the city.

With a population of about 7.5 million, Hong Kong reported more than 10,890 cases of the coronavirus and 197 deaths as of Tuesday, official data showed.