‘Happy Hong Kong’ budget shows city is spared many of world’s most pressing problems
- The most striking feature of the latest Hong Kong budget is the simplicity of the challenges our economy faces and our good fortune in being unburdened by almost any of the budgetary challenges facing so many economies worldwide
Rather, it is the extraordinary simplicity of the challenges our economy faces and our good fortune in being unburdened by almost any of the extraordinary budgetary challenges facing so many economies worldwide.
I do not intend to make light of the hardship created by the Covid-19 pandemic, though I really wish Chan would be more transparent in disaggregating the extraordinary costs linked with our quarantine infrastructure, vaccines and testing regimes.
Neither do I make light of the time it is likely to take to rebuild businesses, recover livelihoods and return to the levels of economic activity we took for granted back in 2018.
We have virtually no government debt and therefore none of the debt service costs that are weighing on so many governments worldwide. Note that Japan’s debt amounts to 263 per cent of GDP, the United States to 120 per cent and France to 113 per cent.
This has perhaps been tolerable during the past decade of quantitative easing and zero interest rates, but the interest- rate increases of the past year have the potential to create massive budgetary crises for many governments. US debt service cost on its US$31 trillion national debt rose in the final quarter of last year to US$213 billion – an annualised cost to the economy of around US$850 billion.
Ukraine war, 1 year on: what lessons has China’s military learned?
If a team from the Stockholm International Peace Research Institute is right, it seems the defence industrial base in the US is laying the ground for “momentous hikes in military spending”, with Canada, the US, Australia and the 29 European Union members pledging US$209 billion new defence funding since the Russian invasion of Ukraine last February. Josep Borrell, the EU’s top foreign policy official, has acknowledged that “investments will be needed to replenish the depleted stock of military equipment [in Europe].”
Given the massive lobbying power of the defence industrial base in the US, significant additional spending will be demanded, putting a squeeze on all of US President Joe Biden’s other budget priorities. What this will mean for those calling for more spending to staunch climate change or to bolster global pandemic preparedness can only be guessed, but it cannot be good.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades