Coronavirus: Hong Kong’s deficit could balloon beyond HK$276.6 billion, with economy shrinking more than expected, finance chief warns
- Paul Chan says authorities are working to help employers and prevent as many SMEs as possible from folding
- He doubles down on decision to tap into reserves, while urging banks to be considerate on loan repayments
Hong Kong’s finance chief has warned that the coronavirus pandemic could cost the government a deficit beyond the latest estimate of HK$276.6 billion (US$35.7 billion), while the city’s economy could contract more than expected.
Financial Secretary Paul Chan Mo-po said on Sunday that officials hoped to minimise the number of small and medium-sized enterprises going bankrupt amid the Covid-19 crisis, and urged banks to be considerate in asking them to repay loans.
Asked if the government would roll out more relief measures if the situation worsened, Chan, speaking on a morning radio programme, said: “It is possible that our deficit will be higher than HK$276.6 billion.
“When we drafted the budget, we estimated a 1.5 per cent contraction in the city’s economy, but now the situation could be even worse.”
A job is not just a job – each employee is supporting a family
He explained that when the outlook for the global economy was bad, trade, tax revenue and land sales would also take a beating.
“I hope that as the pandemic gets under control, the need for more relief measures would disappear, but it’s difficult to say. We will spend when there’s a need,” he said.
Writing on his weekly official blog, Chan added that he believed the aid package was necessary.
“With the package, our fiscal reserve would be reduced from HK$1.1 trillion to about HK$800 billion to HK$900 billion … but this is the time to make use of the reserves.”
One of the measures announced on Wednesday was the raising of the maximum loan amount per enterprise, under the Small and Medium Enterprises Guarantee Scheme.
“Usually in times of economic recession, there would be more cases of bankruptcy … Through the Monetary Authority ... we also liaised with banks and expressed our hope that they will be considerate.
“We also rolled out a 100 per cent guarantee under the scheme; these can be lifebelts for companies.”
A lion’s share of the HK$137.5 billion package would go to job retention, with HK$80 billion spent on this aspect.
The government has also pledged to help cover 50 per cent of the wages of workers, capped at HK$9,000 a month, on condition that employers do not lay them off.
Chan admitted that officials would need to handle these issues, saying: “We appeal to the business sector to be understanding and responsible, because … a job is not just a job – each employee is supporting a family.”
In 2003, the severe acute respiratory syndrome outbreak caused a disastrous property slump in Hong Kong, with the number of negative equity owners peaking at 106,000 in June that year.
Chan said while the number of negative equity owners would increase this year, the situation would not be as bad because the volume of property transactions had been relatively low in recent years.
