Hong Kong is facing “tsunami-like” shocks, and may incur a record budget deficit in the next fiscal year as the city counts the costs of the coronavirus outbreak after months of social unrest, Financial Secretary Paul Chan said.
The impact of the epidemic on the Hong Kong economy is being felt beyond retail, food and beverage and tourism-related industries, Chan said in ablog post Sunday. The short-term economic outlook is “cautious,” and shocks can cause the unemployment rate to “deteriorate rapidly,” Chan said.
“In addition to launching counter-cyclical relief measures to support the economy, the government’s recurrent expenditure in the past 10 years has continued to increase significantly, and the weakening economy has significantly reduced government revenue from tax and land,” Chan wrote, elaborating on the deficit.
The budget shortfall will likely continue for a period of time, he said.
Economists are revising down their forecasts for Hong Kong’s economic growth in 2020, with the virus worsening the current recession which was a fallout from the city’spolitical crisis. The government will seek approval from the territory’s legislature for at least HK$25 billion ($3.2 billion) infresh funding to reduce the impact of the coronavirus outbreak in the city, Chief Executive Carrie Lam said Friday.
“The current fiscal reserves of the government allows it to sustainably launch counter-cyclical measures in the near future to stabilize employment and support the economy,” Chan said Sunday. “However, in order to ensure the stability of public finances, we must pay more attention to fiscal sustainability and pay within our means when considering new expenditures, especially recurrent expenditures, in the future.”
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