All seven million permanent residents in Hong Kong will receive a HK$10,000 (S$1,795.41) from their government in a bid to kick-start the economy which was already facing a recession before the coronavirus outbreak which compounded troubles.
Today (26 February), Hong Kong’s Financial Secretary Paul Chan announced the cash gift in the annual budget. This will cost the government roughly HK$71 billion (S$12.75 billion) out of the HK120 billion (S$215 billion) it committed in the budget which is aimed at tackling the worst economic downtown that the city has experienced in 10 years.
The government is hoping that consumers will put most of the money back into local businesses.
Mr Chan said, “Making good use of fiscal reserves to support enterprises and relieve people’s hardship is certainly in line with our people’s expectations.”
He explained that the city’s economy is reeling from the UK-China trade wars, months of protests last year, and now the coronavirus outbreak, describing the situation as “exceptionally austere”.
“Hong Kong’s economy is facing enormous challenges this year,” said Mr Chan. He predicted that the city’s 0.5 percent growth will face a 1.5 percent contraction in the upcoming year.
Massive pro-democracy protests and clashes with the police became a weekly occurrence in Hong Kong, with Chief Executive Carrie Lam’s approval ratings plummeted to record low in the wake of the crisis.
The rallies were already dying down before the outbreak began, but Covid-19 has put a halt to mass gatherings altogether, though public anger and discontent at the government remains.
The last time Hong Kong announced a handout for all residents was in 2011, following a global crash that sparked a recession in the city.
This new budget sets a record high deficit of HK$130—the first in 15 years. The last time the city ran a deficit was between 2001 and 2004.
Despite that, Mr Chan said that the city’s reserves would see them through the current crisis, adding that the medium-term economic outlook for Hong Kong “remains positive”.
Other measures included in the budget are profits and salary tax breaks as well as low-interest loans for businesses struggling to make wage payments. Sectors that have been hit particularly hard are tourism, restaurants, and retail—all have recorded soaring bankruptcies and rising unemployment that has traditionally remained low.