Govt unveils HK$10,000 handout, deficit to hit record HK$139 bln

February 26, 2020 14:13
Financial Secretary Paul Chan announces a HK$120 billion relief package in his annual budget at the Legislative Council on Wednesday. Photo: Reuters

Hong Kong's Financial Secretary Paul Chan Mo-po unveiled a HK$120 billion relief package in his budget speech on Wednesday, including a much-anticipated cash handout for all adult residents in the city, despite a record fiscal deficit.

All permanent residents aged 18 or above will each receive HK$10,000 cash as part of the measures to help citizens cope with the economic downturn resulting from the raging coronavirus outbreak and months-long social unrest.

Chan said that for 2019-2020, the city's fiscal deficit is estimated at HK$37.8 billion, the worst in 15 years and accounting for 1.3 percent of the estimated GDP.

This deficit is expected to increase to HK$139 billion in the coming financial year, equivalent to 4.8 percent of the estimated GDP, while government revenue is projected at HK$572.5 billion, he said.

As a result, the city's fiscal reserves are expected to fall HK$908.5 billion in 2019-2020, from HK$1.1 trillion.

“The social incidents in the past months and the novel coronavirus epidemic have dealt a heavy blow to Hong Kong's economy,” Chan said, noting that the HK$10,000 disbursement is aimed at boosting local consumption and easing people's financial burdens.

The payout scheme, which will cost HK$71 billion, is expected to benefit about seven million people.

It is “an exceptional measure taken in light of the current unique circumstances and will not, therefore, impose a burden on our long-term fiscal position”, he added.

Details of the payout will be unveiled soon after obtaining funding approval from the Legislative Council.

Under the HK$120 billion relief package, salaries tax and tax under personal assessment for 2019/20 will be reduced by 100 percent, subject to a ceiling of HK$20,000, while rates for residential properties will be waived for 2020-21, subject to a ceiling of HK$1,500 per quarter for each rateable property.

The government will also pay a month's rent for lower-income tenants in public rental units, and providing an extra allowance to eligible social security recipients, equal to one month of the standard Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance.

In January, Chief Executive Carrie Lam Cheng Yuet-ngor pledged HK$10 billion in relief measures, bringing the total package to HK$35 billion since the last summer when protests escalated.

Lam also announced earlier this month the setting up of a HK$30 billion “Anti-epidemic Fund” for various groups of residents and different kinds of businesses hit by the Covid-19 epidemic.

In his speech, Chan said the rapid spread of the novel coronavirus has dealt a severe blow to economic activities and sentiment in Hong Kong.

Although he expects the local economy to be able to recover once the epidemic is over, the outlook is “far from promising in the near term”.

This year, Hong Kong’s economy will grow by -1.5 percent to 0.5 percent in real terms, while the headline inflation rate and underlying inflation rate will ease to 1.7 percent and 2.5 percent respectively, Chan said.

He forecasts more fiscal deficits in the coming five years, with expenditure continuing to rise to about 23.2 percent of the city’s GDP over the medium term.

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EJ Insight writer