Bleak outlook: Sars-style gloom stalks Hong Kong on the edge of deficit
Financial Secretary John Tsang Chun-Wah warns potential cost of pensions and health care reform could tip city into red for the first time since 2003/04
Hong Kong could slip into fiscal deficit within two years, the city’s finance chief has warned, underlining the need for an economic strategy aimed at sustainable growth.
Rolling out his ninth budget – and final fiscal blueprint of the present administration – Financial Secretary John Tsang Chun-wah said if the city pressed ahead with planned health care reforms and a pension scheme, it would find itself with a HK$29 billion deficit by 2018-19, dropping to HK$21 billion the year after that.
The last time Hong Kong – which will have estimated fiscal reserves of HK$855 billion by 2018-19 – posted a deficit was in 2003-2004 when the economy was ravaged by the deadly SARS outbreak which claimed the lives of 299 people.
The prospect of a fiscal deficit injects fresh impetus into the need to revamp the city’s tax system, tackle income disparity and raise long-term competitiveness as the population ages. By 2041, one in three of Hong Kong’s population will be over 65.
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A government source said: “A fiscal deficit will definitely emerge if we implement a retirement protection scheme and press ahead with health-care reforms.”