$100b deficit 'inevitable' amid market, tax, land sale blows

The government will "inevitably" record a deficit of over HK$100 billion this fiscal year due to poor market conditions and less government income, says Financial Secretary Paul Chan Mo-po.

The government earlier predicted the economy to shrink by 3.2 percent this year.

Speaking on a radio program, Chan said the economic outlook is "not optimistic" - but people should "not be too pessimistic" either.

A fiscal deficit of more than HK$100 billion is "inevitable" this year, Chan said.

"There are a few reasons for a high deficit, including poor market conditions, shrinking corporate profits tax and quiet stock and property markets. The government is also having less revenue from stamp duties and land sales," he said.

Chan said Hong Kong is a relatively small-scale open economy that could be affected by the external financial environment, adding that the government still has a fiscal reserve of HK$800 billion.

"It is necessary for the government to take counter-cyclical measures to stabilize the economy when the economic environment is bad," Chan said.

"The HK$800 billion is not a small amount of money We have noticed that people are under great pressure recently and the money can be used to support the economy and jobs."

Chan said Hong Kong's gross domestic product contracted by 4.5 percent year-on-year in the third quarter, which was worse than predicted, mainly due to a drop in exports.

"The cross-border transportation with the mainland has not resumed due to the pandemic. There used to be 16,000 to 17,000 cross-border trucks per day before the pandemic but the number has now dropped to around 8,000," he said.

The consumption and investment performance was stable due to the support of consumption vouchers and public works projects, Chan added.

He said the relaxation of border restrictions has allowed people to travel overseas and "they might spend upon returning to Hong Kong.

He also appealed to the public to promote grassroots jobs.

Chan said the government will hold more large-scale events to attract travelers and boost exchanges with foreign countries.

For instance, some international institutions that attended the financial summit earlier this month were impressed with the business environment in Hong Kong and might look to invest further.

Hong Kong mainly served Western countries in the past, he said, but the city needs to explore new opportunities, adding that he introduced Hong Kong to Middle Eastern countries during a trip last month.

"The officials might hear about Hong Kong's status as a 'super-connector' in the past, but they do not have a thorough understanding of the Greater Bay Area and the development in the mainland. We can tell them that Hong Kong is a driving force for Asia's future economic development," he said.

Chan departed for Bali to attend the G20 leaders' summit tomorrow and on Wednesday where he said he will "tell a good Hong Kong story."

wallis.wang@singtaonewscorp.com