Steep measures: Shops having their sales in the central district of Hong Kong. The city unveiled a HK$761bil (RM430bil) budget, plunging into the coffers to foot the bill for the recession-hit city’s post-Covid recovery. — AFP
HONG KONG: Hong Kong will give out more cash vouchers to consumers and cut the tax rate for first-time home buyers as the government looks to lift the economy out of its pandemic slump.
Residents eligible for spending vouchers will receive HK$5,000 (US$637 or RM2,822) this year, financial secretary Paul Chan said in a speech outlining the city’s budget for the 2023 and 2024 fiscal year.
That’s less than last year, but still a surprise as most economists didn’t expect new vouchers. Chan’s housing proposal involves lowering the tax rate for first-time buyers of properties under HK$20mil (RM11mil).
He said that would ease “the burden on ordinary families of purchasing their first residential properties.”The government will also cap the rebate on salaries tax at HK$6,000 (RM3,389) benefiting 1.9 million taxpayers, down from HK$10,000 (RM5,648) last year.
Despite the stimulus measures, the modest size of several proposals suggested the government wants to keep its budget deficit under control.
Most economists had predicted a small fiscal surplus this year, yet Chan said he would adopt a “moderately liberal fiscal stance” and the city would still run an estimated deficit of HK$54.4bil (RM30.7bil) in the 2023 and 2024 fiscal year.
Hong Kong recorded a budget shortfall of HK$140bil (RM79bil) for the 2022 and 2023 fiscal year, Chan said, about three times as high as his original estimate.
Financial markets were little changed during the speech, with the Hang Seng Index flat.
The city is looking to kick-start its economy as it sees rising competition from Singapore to be Asia’s top destination for business, talent and capital.
It’s charting its rebound during a challenging time: While the reopening of Hong Kong and China post-pandemic is expected to spur activity, Chan said weakening global growth will continue to hurt the city’s exports. A population exodus during the pandemic and rising interest rates have also created headwinds. Chan yesterday forecast economic growth would reach 3.5% to 5.5% in 2023.
Gross domestic product shrank 3.5% in 2022, a figure confirmed by revised data.
While the city has enough of a cushion to cover itself from any shortfall in the short term, any prolonged drop in reserves puts future government spending at risk and increases the chance of more borrowing or tax hikes. — Bloomberg
