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Hong Kong facing 5 years of deficits

By Teddy Ng (China Daily)
Updated: 2009-02-26 07:42

This Asian financial hub is looking at five years of budget deficit, its Financial Secretary John Tsang said yesterday.

Related readings:  Sunny days ahead for Hong Kong securities firms  Hong Kong dreams go sour as crisis worsens

The region's GDP will fall between 2 and 3 percent this year as a result of the worldwide financial turmoil, he said.

As a result, infrastructure projects designed to create jobs and stimulate the economy were the key features of the budget he presented yesterday.

Hong Kong's GDP fell 2.5 percent in the final quarter of last year, and projections for this year point to its first negative growth over a full year since the 1998 Asian financial crisis.

The full impact of the financial crisis will spiral in the coming years, commencing with a budgeted deficit of HK$39.9 billion in the 2009-10 fiscal year, Tsang said.

"In light of the current economic environment and needs of the community, I hold to the view that expenditure for next year should be maintained at a high level despite a fall in revenue," he said. "The government should show its commitment to the community during exceptional times."

Government spending will amount to HK$301.6 billion in the coming fiscal year.

Capital works spending will increase 71 percent to HK$39.3 billion this year, and could reach HK$50 billion a year in subsequent years as the government proceeds with planned infrastructure projects.

The government must respond to the recession and to rising unemployment, Tsang said.

Maintaining Hong Kong's competitive edge and promoting sustainable economic development are two keys to the budgetary strategy, he said.

The government will spend HK$1.6 billion to create 62,000 jobs over the next three years, he said.

Also, about 1.4 million taxpayers will benefit from a one-off 50 percent income tax reduction, subject to a HK$6,000 ceiling, and property rates will be waived in the first half of the year.

Rental rates for government properties will be reduced 20 percent for a period of three months.

Other measures to promote economic development include a HK$300 million investment in creative industries and more cooperation with the Pearl River Delta region, Tsang said.

Hong Kong is well positioned for a speedy rebound given the strong support of the mainland, he said.