2019 was a particularly rough year for the global economy. Hong Kong especially was hit relatively hard thanks to ongoing protests which has affected both local and foreign business in the city-state. As such, Hong Kong’s government has recently revealed their intention to “boldly” shore up the finance hub’s economy.
Warning that unemployment is likely to edge up higher, Financial Secretary Paul Chan pledged the annual budget due on February 26 will maintain spending on infrastructure and public services even as it includes additional stimulus.
“We will continue to spend boldly to help those disadvantaged,” Chan told Bloomberg Television’s Yvonne Man in an exclusive interview.
“Given the large amount of fiscal surplus we’ve accumulated over the years I do think we have the capability and financial resources to help us come through this economic recession,” he said.
However, this generosity may not extend to cash handouts.
For the moment, Chan states that the government has not yet come to the decision to pursue such a policy; as careful consideration is needed since such a huge move could trigger a deficit of more than HK$100 billion (approx. US$12.9 billion).
The finance official also had a message for currency speculators by ruling out any change in the Hong Kong dollar’s peg to the greenback, a favourite guessing game during periods of economic stress.
“We have no intention to review it,” Chan said. “There are no circumstances in which it would be reviewed.”
These comments come on the back of the ongoing recession that Hong Kong is experiencing due to months of continuous protests.
The International Monetary Fund has urged the city’s government to increase spending in order to stimulate the economy. With little sign that the protests will abate, business owners have called for more support as well.
The IMF has said the city’s economy likely shrank 1.2 percent last year and forecasts 1 percent growth in 2020. Chan expects the economy to have contracted 1.3 percent in 2019.
Since the protests began in mid-2019, the government has announced a series of stimulus measures that is worth around HK$25 billion.
Said stimulus is aimed at businesses and various social groups and includes some tax breaks, one-time fuel and utility subsidies, as well as support for children and the elderly.
Some economists have criticised the stimulus package, stating that the announced stimulus spending only amounts to less than 1 percent of Hong Kong’s GDP while the city’s fiscal reserve stood at HK$1.05 trillion as of October.