Deficit looms as fierce winter hits businessesTop News | Jane Cheung 3 Dec 2019
Financial Secretary Paul Chan Mo-po warns Hong Kong is set for a budget deficit this financial year - the first time in 15 years - amid a recession and social unrest.
The economy will contract 1.3 percent this year amid global economic recession and the Sino-US trade war, with more Hongkongers seeing their livelihoods affected by the current unrest, Chan told the Legislative Council's panel on financial affairs yesterday.
"Economic development slowed in the second half of this year and the condition deteriorated," he said.
But Chan assured the government is still in "good financial condition" from accumulated fiscal reserves from previous years.
This came after the government recorded a 2.9 percent drop in gross domestic product in the third quarter this year for the first time in 10 years.
"Social events in the past few months have greatly damaged the economy," he said.
"We expect the GDP to drop by 2 percent due to social events and the government hopes the situation would end soon."
Chan said tourist numbers have dipped due to the protests - currently in their 27th week - with many hotels having just 60 percent occupancy.
"These sectors [tourism, hotel, catering and others] have entered a fierce winter, with the unemployment rates of some heavily affected industries rising dramatically," Chan said. "The catering industry saw an unemployment rate as high as 6.1 percent."
Government economist Andrew Au Sik-hung said the overall unemployment rate rose to 3.1 percent between August and October and could rise even further.
The financial secretary said the protests have weakened the confidence of international investors and affected local consumption.
"The economy next year is expected to endure more hardship and more citizens will be affected if the violence does not end," Chan said
Chan said the government will roll out relief measures if necessary.
It is considering allowing people to pay taxes in installments and subsidies for electric bills and rates, he said.
Hong Kong saw its last deficit of over HK$60 billion during the SARS outbreak in financial year 2003-04.
In the same Legco meeting, New People's Party lawmaker Regina Ip Lau Suk-yee raised concerns that the Hong Kong Human Rights and Democracy Act could affect the IT industry and Greater Bay Area development.
"Most people only looked at the matter as gossip, as they are only worried about the names on the sanctions list and overlooked the fact that the law could hinder the development of Hong Kong and the Greater Bay Area," she said.
"These people are shortsighted and shallow to ignore the potential harm the law may do to Hong Kong."
Lawmaker Lo Wai-kwok from the Business and Professionals Alliance for Hong Kong asked Chan how the law would affect the SAR as he criticized US President Donald Trump for ignoring the Hong Kong-US partnership before signing it into law.
Chan said the act will be discussed in a joint panel meeting at Legco on Friday.