The government of Hong Kong announced on Wednesday that it will spend more than 170 billion Hong Kong dollars ($21.8 billion) to fight the pandemic and support the economy, a day after authorities said virus control measures will be extended until April 20.
The semi-autonomous Chinese city is experiencing its fifth wave of coronavirus infections. coronavirus, with daily cases skyrocketing to record levels. On Wednesday, Hong Kong reported 8,674 new cases.
Last week, the executive director, Carrie Lam, ruled out a full lockdown, but kept zero policy COVID-19 from China.
During Wednesday’s budget speech, Financial Secretary Paul Chan said the spread of the virus has “dealt a heavy blow to many people, disrupting both their lives and work, and severely affected the operations of small and medium-sized Business”.
“At this critical time, we need to direct more resources to ease people’s hardships and give SMEs breathing room to stabilize the economy and maintain public confidence,” he said, according to an official translation of his speech.
The announced economic measures include:
- A 100% reduction in income tax for companies and payroll tax for individuals, capped at HK$10,000 ($1,280);
- Consumer vouchers worth HK$10,000;
- HK$10,000 allowance for temporary unemployed;
- Rent waiver for businesses that must close due to Covid rules.
The budget also allocates HK$22 billion for “anti-epidemic” measures aimed at boosting Covid testing, procuring test kits and providing support to the city’s Hospital Authority, as well as HK$6 billion to buy more vaccines as booster doses.
“I have earmarked $20 billion for other potential anti-epidemic needs. We will provide all support to fight the epidemic in case more resources are required,” Chan said.
Hong Kong’s budget is “mostly carrot” rather than stick, and that’s a good thing, said Paul Gambles, co-founder of advisory firm MBMG Group.
Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, told CNBC that more spending is “good news” and that spending should be directed at the people and businesses that need it most.
Hong Kong Economic Outlook
After two consecutive years of decline, the general economy of Hong Kong saw a “visible recovery” in 2021 with 6.4% growth, Chan said.
He forecast growth of 2% to 3.5% by 2022 and said the medium-term outlook is positive.
However, Garcia-Herrero said the city’s growth predictions were optimistic. Natixis forecasts economic growth of just under 2% by 2022, assuming the current wave of COVID-19 come at the end of March.
If the virus continues to spread, there could be a “lost first half,” he told “Street Signs Asia,” indicating that growth in the first half of the year may not be as strong as in the second half.
He added that this year’s stimulus is “even more important” than last year’s, as growth will be slower.
“How much we need is not so much about the number, but about how specific it is so that it doesn’t get kept in the drawer. That is the key,” she said.
Hong Kong’s economy has been affected by the trade war between United States and China, internal political unrest and the Covid pandemic in recent years.
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