Cash handouts, tax cuts on the cards for recession budget

Eyes are also on the city’s $1.12t fiscal reserve.

As the Hong Kong government posts its first deficit in more than 15 years, all eyes will be on financial secretary Paul Chan’s budget release Wednesday and how he’ll tap cash reserves to stimulate an economy under pressure from months of unrest and the coronavirus outbreak.

Anti-government protests drove the city into recession last year and economists now forecast another slump for 2020, spelling the first back-to-back annual contractions on record. Yet Chan holds a major card that he has largely yet to play: A fiscal reserve that stood at $1.12t (US$144b) as of 31 December.

One factor that could inform Hong Kong’s response is the big packages announced elsewhere, such as by rival Singapore, which has pledged to post its biggest budget deficit since at least 1997 to combat the impact of the virus. Whilst Hong Kong has historically espoused a conservative fiscal policy, the government has already earmarked an extra $30b in this fiscal year to help those affected by the virus outbreak.

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