The SAR government’s latest round of HK$137.5 billion ($17.7 billion) relief measures to cushion the blow from the coronavirus pandemic has been welcomed as a strong package to safeguard jobs and support a wider range of battered industries.
The second round of relief aid, announced on Wednesday, will widen the 2020-21 budget deficit to HK$276.6 billion — about 9.5 percent of Hong Kong’s gross domestic product. As a result, the city’s fiscal reserves will be reduced to HK$800 to 900 billion.
It shows Hong Kong still has a healthy fiscal position compared to the rest of the world, and it may enable the government to step up efforts, if needed, to soften the impact from the COVID-19 outbreak
Carie Li,
an economist at OCBC Wing Hang Bank
“It shows Hong Kong still has a healthy fiscal position compared to the rest of the world, and it may enable the government to step up efforts, if needed, to soften the impact from the COVID-19 outbreak,” said Carie Li, an economist at OCBC Wing Hang Bank.
She said such bold moves may propel the government to broaden the tax base in future to build up its fiscal reserves to prepare for the next recession.
To prevent a further spike in the unemployment rate, the government also launched an unprecedented HK$80 billion program benefiting 1.5 million employees by subsidizing their wages capped at HK$9,000 for six months.
Hong Kong and Shanghai Banking Corp — the city’s largest bank — said it will not apply for the subsidy to employers under the Employment Support Scheme so as to allow the government funding to be spread out as widely as possible.
The bank decided last month to shelve plans to cut jobs due to the impact of the pandemic.
Hong Kong’s jobless rate surged to 3.7 percent in the three months through February — the highest in almost a decade. In a report, Li said the new measures will help prevent unemployment from worsening rapidly, which is important to an economy with private consumption taking up more than 65 percent of the total GDP.
However, she said while the fiscal stimulus will help mitigate the downside pressure on growth, it will not be able to reverse the downturn if the pandemic persists for a longer period.
The Federation of Hong Kong Hotel Owners welcomed the government’s relief package, which also covers the hotel industry. However, it urged the government to raise the subsidy to employees as it’s still lower than that of some countries and regions which subsidize more than 75 percent of workers’ salaries.
Marcos Chan, head of research of the Greater Bay Area at CBRE — a US commercial real-estate services and investment firm — pointed out that rent is another key component of the operating expenditure of retailers and restaurants.
But, retail sector landlords have yet to offer across-the-board rental concessions to tenants, while individual landlords are more flexible with rent cuts.
CBRE estimates that retail-property rents will fall by at least 20 percent this year. It also expects weak real-estate demand from companies, especially multinational corporations, leading to higher office vacancies in the coming months.
