The Hong Kong Special Administrative Region (HKSAR) government runs a fiscal deficit of 37.8 billion Hong Kong dollars (about 4.85 billion U.S. dollars) in 2019-2020, the first time for Hong Kong over the past 15 years, the HKSAR government's Financial Secretary Paul Chan said on Wednesday.
The 2019-2020 revised estimate on government revenue is 567.3 billion Hong Kong dollars, lower than the original estimate by 9.4 percent, while the revised estimate on government expenditure is 611.4 billion Hong Kong dollars, 0.6 percent higher than the original estimate, Chan said when delivering the annual budget at the HKSAR Legislative Council.
He pointed out that the government revenue is revised down mainly because revenues from profits tax, salaries tax and stamp duties are lower than the original estimate, while the government expenditure grows mainly because of the spending on economic relief measures and efforts against COVID-19 outbreak.
"In the past six months, I have announced four rounds of relief measures costing over 30 billion Hong Kong dollars. These measures, together with the 30 billion (Hong Kong dollar) Anti-epidemic Fund established in response to the recent novel coronavirus outbreak, resulted in a deficit of about 37.8 billion for 2019-2020, which is about 1.3 percent of GDP (gross domestic product)," he said.
This is the first time for the HKSAR government to run a fiscal deficit over the past 15 years, Chan said, adding that he forecast a deficit for the next five years as well.
Regarding 2020-2021, taking into account the impact of the 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, Chan said, adding that measures for supporting the general public and enterprises, including the cash payout scheme, will be rolled out.
"Though confident in Hong Kong's fundamental strengths and long-term prospects, I must prudently assess the impact of the current situation on government revenue in the coming year. I thus forecast a decrease in tax and land revenues," Chan said.
Taking also into account the launch of countercyclical fiscal measures on a much larger scale and the continued increase in recurrent expenditure, Chan said he expects the fiscal deficit for next year will be 139.1 billion Hong Kong dollars, accounting for 4.8 percent of GDP.
"Although the deficit will hit an all-time high, a close look at its components shows that almost 120 billion (Hong Kong dollars) of the deficit are related to the cash payout scheme and other one-off relief measures, which will not incur long-term financial commitments," he explained.
The financial secretary stressed that the significant rise in government expenditure over the years was for enhancing services or increasing investment in various areas of the community, which were essential to catching up with the needs of the public.
Hong Kong's fiscal reserves are expected to be 1,133.1 billion Hong Kong dollars by March 31, 2020, according to the budget.
"In the coming years, government expenditure will enter a consolidation period. We will focus on the optimal use of resources to implement the committed initiatives in an orderly and effective manner so that the public will see progressive improvements in public services and social infrastructure," he said. (1 Hong Kong dollar equals about 0.13 U.S. dollars)