Victoria Harbor and Central Financial District, Hong Kong, China.
Ucg | Universal Images Group | Getty Images
Hong Kong will give more handouts to consumers to support the city’s recovery from a prolonged economic downturn induced by Covid-19 restrictions, Financial Secretary Paul Chan announced in the 2023/24 budget on Wednesday.
The global financial hub will issue vouchers worth HK$5,000 ($637) per person to all adults this year, half the amount issued in 2022 as Chan attempts to dial down fiscal spending with an eye on the city’s coffers.
Chan told legislators the city was at the beginning of an economic recovery, no longer shackled by stringent Covid measures that have isolated it from the rest of the world.
“I believe that Hong Kong’s economy will visibly recover this year, and I remain positive,” Chan said.
“However, the economic recovery is still in its initial stage, and there is a need for our people and businesses to regain vigor.”
Chan also flagged a reduction in salaries tax by 100%, capped at HK$6,000, lower than the cap set for the previous budget. He said the government will also introduce a new capital investment entrant scheme to attract talent.
Hong Kong counts on increased cross-border business with mainland China, which has also given up enforcing Covid rules.
The city had spent more than HK$600 billion ($76.44 billion) on various pandemic relief programs for the past three years, forcing it to run rare budget deficits.
Hong Kong usually runs balanced budgets or surpluses, since its pegged currency system commits it to fiscal prudence, but still has ample reserves.
Currently at about HK$800 billion ($101.93 billion), they cover the administration’s spending needs for 12 months.
The city’s economy is expected to grow 3.5%-5.5% this year after contracting 3.5% in 2022, Chan said.
Analysts say its exposure to a weakening global economy and the need to keep up with U.S. interest rate hikes to maintain the local currency’s peg to the dollar still generate high levels of uncertainty about the intensity of Hong Kong’s recovery.