The Financial Secretary, Mr Chan Mo-po (“Mr Chan”), presented the 2020-21 Government Budget to the Legislative Council (“Legco”) on 26 February 2020.
Mr Chan reported that the outbreak of Covid-19 after several months of social unrest has pushed Hong Kong into recession for the first time since global financial crisis in 2009. Hong Kong economy has technically entered recession in the third quarter last year and contracted by 1.2% for 2019.
Mr Chan forecasted a $37.8 billion consolidated deficit for the year ending 31 March 2020. He estimated Hong Kong is likely to see a record high deficit of $139.1 billion for 2020-21. Hong Kong’s biggest deficit in history is $63.3 billion in 2001-02. Mr Chan said the city could remain in the red for a number of years and the Government will be cautious in boosting recurrent spending.
Unemployment rate in January 2020 hit 3.4%, the highest rate since 2016. Taking into account the impact of external economic environment and the epidemic, Hong Kong’s economy is expected to be under contractionary pressure, with enterprises facing difficulties and the unemployment rate on the rise.
LegCo has recently approved the Government's proposal to set up a $30 billion Anti-epidemic Fund for the fight against Covid-19. As for distribution, $10 billion would be used to upgrade the government's efforts to handle the outbreak, and $17 billion would be for those affected by the outbreak including enterprises and people, while the balance of $3 billion would be earmarked for emergency. Although Mr Chan recognised financial resources alone are not enough to tackle the challenges Hong Kong is facing, he considered making good use of fiscal reserves to support enterprises and relieve people’s hardship is certainly in line with Hongkongers’ expectations towards the Government under the current difficult environment. He decided to implement counter-cyclical measures of a massive scale involving above $120 billion which include the most eye-catching measure of cash payment of $10,000 to each permanent resident aged 18 or above. He put the budget focus this year on “supporting enterprises, safeguarding jobs, stimulating the economy and relieving people’s burden”.