HK set to report first budget deficit in 15 years

By Xie Jun Source:Global Times Published: 2019/12/2 20:03:40

Disturbances hit sectors that usually contribute heavily to tax base

Tourists visit a scenic spot at Tsim Sha Tsui in Hong Kong, south China, Nov. 14, 2019. The number of visitor arrivals to Hong Kong has witnessed the sharpest decline in 16 years for the third quarter of 2019 over continued unrest in the region, official data showed Wednesday. (Xinhua/Zhu Xiang)

Hong Kong is poised to experience the first budget deficit in 15 years in the fiscal year that ends in March 2020, as months of riots are battering hurting Hong Kong's traditional economic sectors, like retail and catering, that were normally big tax contributors, experts said. 

But active fiscal expenditure is necessary, one expert said, as Hong Kong needs policy stimulation so that its riot-hit consumption can recover.

Hong Kong Financial Secretary Paul Chan Mo-po on Monday predicted the potential budget deficit. He attributed it to declines in the city's tax income and land sales due to social unrest. 

"Around the middle of the year, we rolled out some remedial measures. So at the end of this financial year next March, the Hong Kong Special 

Administrative Region (HKSAR) government might be in the red," said Chan, according to the

An underlying reason behind the looming budget deficit is that the ongoing riots besetting Hong Kong are hitting parts of the city's economy that have been big tax contributors, such as retail and tourism, Liu Guohong, director of the Department of Finance and Modern Industries at the China Development Institute in Shenzhen, told the Global Times on Monday. 

Hong Kong's retail sales slumped by 24.3 percent year-on-year in October, according to data released by Hong Kong's Census and Statistics Department on Monday. 

The slump was worse than market expectations of 22.6 percent. 

Lin Jiang, an economics professor at Lingnan College, Sun Yat-sen University, said that the poor balance sheet exposes Hong Kong's imbalanced industrial structure. 

"Hong Kong has been too reliant on a few traditional industries like real estate. When those sectors experience difficulties, there are no other industries to offset the slump and prop up the economy like what the internet and high-technology  industries did for the Chinese mainland economy," Lin said.

Hong Kong lost its income/revenue balance at a time when its economy has been badly hurt as a result of the months-long violence. According to Chan, Hong Kong's economy this year will contract by 1.3 percent, the first annual decline since 2009. 

"Many industries have entered winter...months of violence have slashed the international community's and investors' confidence in Hong Kong...the city's business prospects in 2020 will be full of challenges," Chan said, calling on violence to be curbed and rational discussions to be carried out. 

But there remains a bright side. 

Chan said that the HKSAR government is still in a healthy fiscal position, given the city's reserves in past years. He also placed great hopes on the city's financial sector, saying on Sunday that Hong Kong's social instability has had a limited influence on the city's financial markets. 

Lin said that many Hong Kong social organizations have called for Hong Kong people to "rescue themselves" by encouraging them to increase consumption, and those efforts have paid off to some extent. 

"I visited the New Town Plaza in Shatin a few days ago and found that it was 

bustling with businesses and people. It was as if things went back to the days before the riots," he said. 

He also said that the Hong Kong government has made the right choice to stick to an expanding fiscal policy, saying that it could encourage people to spend and help businesses recover. 


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