Economic growth of Hong Kong rests on more than voucher scheme
- Latest consumption handouts are sure to please many who are happy to spend, but further options to boost Hong Kong’s economy should be explored
Hongkongers will again go on a spending spree with a new round of consumption vouchers dished out on Sunday by the government.
To many who are still struggling with the fallout of the pandemic, the HK$5,000 (US$640) subsidy will provide some quick and much-needed relief. Others may just feel good to have a little extra to spend, having put up with years of doom and gloom.
In any case, the handouts give a timely boost as the city embarks on a journey of recovery, which is proving tougher than expected.
Scenes at restaurants and malls crowded with shoppers show how a cash-rich government can bring some cheer by simply loosening its purse strings a little.
Some 6.4 million people have received HK$3,000 in digital credit under the first phase of the scheme, to be followed by another HK$2,000 in July. Those from outside the city on various talent and work admission schemes, or who are studying, are entitled to a total of HK$2,500.
Hongkongers lap up spending vouchers, but HK$5,000 not enough for some
The voucher scheme is already in its third year. What sets the latest handout apart is its amount and timing. For the first time, the subsidy has landed after all Covid-19 health restrictions have been lifted.
The absence of social-distancing restrictions and business curbs means consumers may spend more freely. But with just half of last year’s amount to spend, the economic impact may be less substantial.
According to Financial Secretary Paul Chan Mo-po, the handout will inject HK$20 billion in consumer spending into the market, equivalent to 60 per cent of the city’s monthly retail sales.
This translates into a modest 0.6 per cent boost to the economy, which Chan believes is crucial to economic recovery.
While exports in the first two months shrank by 25 per cent year on year, consumption rose 17 per cent following the reopening of the mainland border and the relaxation of restrictions. The mixed performance shows the road ahead may still be bumpy.
Chan well knows it will take more than ad hoc government subsidies to rebuild the city. Experience has shown that the economic impact from the final phase of the previous handout was weaker than estimated.
Everything you need to know about Hong Kong’s latest round of vouchers
Unlike at the initial stage when consumers may have topped up their credit to spend more, analysts said some people complained the amount was too small and therefore spent within their limit.
The economic gain may be considerably less this time, and there is even a danger the public may have become so used to handouts they will expect more in the future.
A regular and indiscriminate licence to spend is hardly in line with the fiscal prudence expected of a responsible government. Officials must resist such largesse in the long run and explore new engines for economic growth instead.
