A man reads a newspaper while sitting on a promenade that runs along Victoria Harbour in Hong Kong on Dec 14, 2020. (ANTHONY WALLACE / AFP)
Hong Kong’s 2020-21 fiscal deficit for will probably reach a record HK$363 billion (US$46.8 billion), accounting for 13.5 percent of its estimated gross domestic product, global accounting firm Ernst & Young projected on Wednesday.
The historic-high deficit will reduce the fiscal reserve to HK$797.3 billion, equivalent to 11 months of government expenditures, a situation reminiscent of 2003-2004 when the city faced a recession caused by the 2003 Severe Acute Respiratory Syndrome, or SARS outbreak.
The historic-high deficit will reduce the fiscal reserve to HK$797.3 billion, equivalent to 11 months of government expenditures, a situation reminiscent of 2003-2004 when the city faced a recession caused by the 2003 Severe Acute Respiratory Syndrome, or SARS outbreak
Agnes Chan Sui-kuen, managing partner for Hong Kong and Macao at Ernst & Young, said there is a bumpy road ahead for a still-fragile global economic recovery, although the world is still set for growth under the pandemic-induced “new normal”.
As the SAR government is scheduled to announce the budget plan for fiscal year 2021-2022 on Feb 24，Ernst & Young supported a proposal to provide one-off relief measures worth as much as HK$100 billion for struggling residents and companies. This includes handouts of HK$5,000 worth of electronic shopping vouchers for each citizen to boost local consumption and could eventually translate into 1.4 percent of economic growth.
Paul Ho, financial services tax and business advisory services partner at Ernst & Young Tax Services, said the Guangdong-Hong Kong-Macao Greater Bay Area also offers a beacon of hope.
Ho suggested the SAR government should introduce new tax relief measures to attract more high-tech or creative companies and professionals to establish a presence in the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop.
The Asian financial center braces – for the first time – for two consecutive full-year economic contractions, with challenges looming ahead in the first half of 2021, Secretary for Finance Chan Mo-po said on Wednesday.
With the rollout of several rounds of relief measures to lift the pandemic-torn economy, the government has run a record deficit of more than HK$300 billion. Chan expressed reservations about a fresh round of cash handouts on Saturday.
Over the past year, the fiscal reserve has plunged by 30 percent to nearly HK$800 billion. Chan stressed that the government has to strike a delicate balance between dishing out sweeteners and saving for a rainy day.
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