Editorial | Strong actions from leaders can help Hong Kong tackle budget deficit
- Economic and political challenges remain but city’s government has the resources to overcome obstacles brought about by Covid-19 and other factors to restore confidence and balance the books sooner rather than later
Hong Kong has long been used to dealing with economic volatility but after almost three years of stunted growth because of the coronavirus pandemic, it is no surprise that government finances are in the red.
Still, the warning of a worse-than-expected HK$100 billion (US$12.7 billion) budget deficit this financial year is a disturbing reminder of the challenges ahead – Covid-19 is still present, the economy remains weak and confidence in the city is fragile.
Public finances will continue to be impacted. Revenue from stamp duties are likely to come in a third less than expected following a 37 per cent drop in home purchases in the first four months, while transactions on the stock market between April and August shrank by more than a quarter compared with the same period last year.
Land sales also plunged, generating only HK$17.2 billion in the first five months of the year, just a fraction of the annual forecast of HK$120 billion, according to Financial Secretary Paul Chan Mo-po.
The latest projection for the deficit, up from the original HK$56.3 billion, would be the second-largest in the city’s history after a shortfall of HK$232.5 billion in 2020. But with six months remaining in the current financial year, a turnaround cannot be ruled out; after all, Chan and his predecessors are known for having made wrong estimates of budget surpluses and deficits before.
