Hong Kong aims to revive economy under COVID-19 impact with new annual budget

Hong Kong unveiled Wednesday a package of economic stimulus in its budget for the 2021-22 financial year as businesses and individuals are struggling amid the lingering COVID-19 epidemic.

Aerial photo taken on July 16, 2020 shows the Wan Chai of south China's Hong Kong. (Xinhua/Lui Siu Wai)

While embracing a third straight year with a fiscal deficit, the global financial hub still proposed over 120 billion Hong Kong dollars (15.48 billion U.S. dollars) of counter-cyclical measures, aimed at overcoming current hardships and investing for a better future.

It is a "critical time" as Hong Kong is confronted with the dual challenges from COVID-19 and financial distress, Chief Executive of the Hong Kong Special Administrative Region (HKSAR) Carrie Lam said.

Despite all the difficulties, Financial Secretary of the HKSAR government Paul Chan believes that the economy will likely gain a stronger momentum in the second half of 2021 and enjoy a catch-up growth in the next several years when delivering the budget in the Legislative Council.

Hong Kong will continue to benefit from the mainland development and the shift in global economic gravity from West to East, Chan said.

BOLSTERING ECONOMY

The stimulus package included reduction of taxes and fees worth 9.5 billion Hong Kong dollars for businesses, an extended financing guarantee scheme for small and medium-sized enterprises, a job training program to benefit 20,000 people, and creation of 30,000 temporary jobs.

Individuals will have tax breaks, subsidies on power charges, social security allowance, favorable personal loans, and 5,000 Hong Kong dollars of electronic consumption vouchers.

This year's budget focuses on stabilizing the economy and relieving people's burden, and seeks to create a leverage effect to benefit individuals and enterprises, Chan said.

The government spending in education, social welfare and healthcare combined will come to 302.3 billion Hong Kong dollars, accounting for 58 percent of the total estimated recurrent expenditure and representing an increase of 45 percent from four years ago.

People wearing face masks walk on the street in Hong Kong, south China, Feb. 23, 2021. (Xinhua/Lo Ping Fai)

The budget was released after Hong Kong's economy slipped 6.1 percent last year, with the latest jobless rate spiking to 7 percent.

As the COVID-19 epidemic has shown signs of abating and the COVID-19 vaccines began to be administered, Chan forecast that Hong Kong will resume positive growth in 2021, with an increase of 3.5 percent to 5.5 percent in real terms.

With the new economic policies, Hong Kong is expected to see a deficit of 101.6 billion Hong Kong dollars for the 2021-22 financial year, equivalent to 3.6 percent of the local gross domestic product (GDP), marking the third straight year with a budget deficit.

Lam recognized the necessity of the budget deficit. "I support the pragmatic approach in adopting a deficit budget amid the prevailing economic downturn."

MAINLAND OPPORTUNITIES

Chan in particular highlighted the significance of opportunities from the mainland to Hong Kong's development.

"Hong Kong can open up greater room for development by leveraging the advantages under 'one country, two systems,' playing its unique role as a gateway and an intermediary, and integrating into the new overall development of our country," Chan said.

By actively participating in the national dual circulation development strategy and seizing the opportunities brought by the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the Belt and Road Initiative, Hong Kong will be able to achieve greater development, Chan said.

Aerial photo taken on Oct. 24, 2019 shows a morning view of an artificial island of the Hong Kong-Zhuhai-Macao Bridge, south China. (Xinhua/Cheong Kam Ka)

After swiftly bringing COVID-19 under control, the mainland has been experiencing a strong rebound since the second quarter last year, becoming the only major economy in the world that achieved a positive growth.

"We have experienced many changes at different points in our history, but the support of our country has remained unchanged," Chan said.

There is no doubt that Hong Kong should actively integrate into the national landscape, Hong Kong economist Lau Pui-king said, stressing that Hong Kong can establish a more forward-looking development strategy as long as it finds a proper role in the national development.

Yang Yuchuan, a professor with the Hong Kong Financial Services Institute, said the new measures in the budget to propel innovation and foster talent will help Hong Kong fit into the industrial chain of technology and innovation with mainland cities of the Greater Bay Area.

In this way, Hong Kong's innovation ecosystem will improve and its economy will gain new impetus, Yang said.

With support from the mainland, Chan forecast that Hong Kong's economy will grow by an annual average of 3.3 percent from 2022 to 2025. (1 U.S. dollar equals 7.75 Hong Kong dollars).