Hong Kong’s government has presented a budget for the upcoming financial year, which includes measures to support the economy’s speedy recovery. The financial secretary of the Hong Kong Special Administrative Region, Paul Chan, delivered the budget, predicting a visible rebound this year, with growth of 3.5% to 5.5% for the year as a whole. Chan expects private consumption to increase as economic sentiment improves in tandem with the revival of economic activities domestically, as well as the rapid return of Hong Kong’s exchanges with the mainland and the world to normalcy.
The Hong Kong economy contracted by 3.5% year-on-year in 2022 amid both external and domestic headwinds, while the underlying inflation rate remained moderate at 1.7% last year. Chan forecasted that the underlying inflation rate and the headline inflation rate will rise to 2.5% and 2.9% respectively this year, taking into account domestic cost pressures alongside the economic recovery.
The HKSAR will take a “moderately liberal” fiscal stance in the new financial year, leading to a deficit budget, with over 80% of the resources involved for the budget initiatives benefiting the general public and small and medium-sized enterprises. The HKSAR government has been adopting an expansionary fiscal policy during the COVID-19 pandemic, accumulating a “fairly high” fiscal deficit over the past three years.
Chan proposed targeted measures to support people and enterprises, including the issuance of electronic consumption vouchers of 5,000 Hong Kong dollars (about $637), tax cuts for companies to ease their operating pressure, and one-off relief measures to alleviate the economic pressure on the public. He also earmarked 100 million Hong Kong dollars for attracting more mega events with significant visitor appeal and tourism promotional effect to be staged in Hong Kong.
Despite heavy fiscal deficits, Chan said the HKSAR will continue to adhere to the principles of exercising fiscal prudence, containing the growth of government expenditure, and exploring various ways to increase revenue. He proposed that the rate of profits tax and salaries tax should remain unchanged this year, while imposing an annual special football betting duty of 2.4 billion Hong Kong dollars on the Hong Kong Jockey Club under the Betting Duty Ordinance for five years starting from 2023-24, while the current betting duty rates remain unchanged.
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