KPMG — one of the “Big Four” global accountants – has joined in the chorus of gloomy forecasts for the recession-hit Hong Kong economy, projecting a HK$47.7 billion (US$6.1 billion) deficit for the 2019-20 financial year.
The latest forecast is even steeper than the already miserable figures foreseen by Deloitte and PwC.
The prediction by the Netherlands-based accountant, in stark contrast to a HK$68 billion surplus the SAR had posted in the 2018-19 fiscal year, suggested the city is on track to record its first deficit in 15 years
The prediction by the Netherlands-based accountant, in stark contrast to a HK$68 billion surplus the SAR had posted in the 2018-19 fiscal year, suggested the city is on track to record its first deficit in 15 years.
Financial Secretary Paul Chan Mo-po said in February last year he was expecting a HK$16.8 billion surplus for the current fiscal year.
The almost unanimous shift from expected surpluses to deficits, according to KPMG, is mainly due to the increased expenditure on relief measures for the local economy, battered by the double whammy of the continued social unrest and the novel coronavirus pneumonia outbreak.
The woes have been compounded by reduced revenues of about HK$21.3 billion, mainly due to delayed issuance of tax bills and taxpayers’ delay in paying prepaid taxes.
At the same time, revenues from stamp duty and land sales were down by HK$3 billion and HK$12 billion, respectively.
The government’s deficit is likely to widen in the 2020-21 fiscal year, as the factors affecting the city’s economy that began in the second half of last year have not been fully reflected in the government’s financial performance, said Alice Leung, a tax partner at KPMG China.
The global economic downturn has led to lower corporate profits, resulting in less government tax revenue, and the recent relief measures, along with a HK$25 billion fund to help businesses overcome the coronavirus outbreak, have not been reflected in the accounts.
On the bright side, Hong Kong’s economy would remain safe and sound, with KPMG estimating that the city’s fiscal reserves would reach HK$1.12 trillion by the end of next month. Even with zero income, the reserves are seen to be enough to cover up to 31 months of recurrent spending.
Deloitte and PwC -- two other “Big Four” accountants – had earlier projected deficits of HK$47.5 billion and HK$38.3 billion, respectively, for the SAR government for the 2019-20 financial year.
