Hong Kong to record highest deficit in history as top officials argue city must ‘reserve financial strength’ to cope with storms ahead
- Possible winter resurgence of Covid-19, ongoing US-China tensions mean cash reserves need to be kept strong, argue financial secretary and city’s No 2 executive
- And while another round of pandemic financial relief is in the works, according to Paul Chan, it must be done prudently
The fresh warnings about the dire financial situation were issued by Chief Secretary Matthew Cheung Kin-chung and Financial Secretary Paul Chan Mo-po via their respective blogs on Sunday, and come despite the city recording 11 straight days with fewer than 30 coronavirus cases.
“The continuing epidemic caused an unprecedented blow to Hong Kong’s economic activities,” Cheung wrote. “We expect that Hong Kong will face severe economic recession pressure, and will record the highest deficit ever this financial year.”
Chan, the financial chief, had announced in February that the budget deficit in the coming financial year of 2020-2021 was estimated to be HK$139 billion. The unprecedented level, which accounts for 4.8 per cent of the GDP, went against the government’s fiscal principle of keeping the deficit below 3 per cent of GDP.
On Sunday, he noted that the two rounds of relief measures from the Anti-epidemic Fund had already swollen the current year’s budget deficit to nearly HK$290 billion (US$37.4 billion), or 10 per cent of the city’s gross domestic product.