Pedestrians pas shops in Hong Kong, China, on Saturday, Oct. 15, 2022. Hong Kong needs to change into a world heart for digital property as the town seeks to bolster its standing as a world monetary hub following the disruptions attributable to the pandemic. Photographer: Lam Yik/Bloomberg by way of Getty Pictures
Bloomberg | Bloomberg | Getty Pictures
Hong Kong’s Monetary Secretary Paul Chan struck a optimistic tone throughout his price range speech on Wednesday as he revealed measures to spice up financial restoration after the Covid-19 pandemic, in addition to incentives to assist companies and residents.
Chan mentioned the town is on the early levels of restoration for the reason that lifting of most of its stringent Covid measures late final 12 months.
“I consider that Hong Kong’s financial system will visibly recuperate this 12 months, and I stay optimistic,” Chan mentioned throughout his price range speech. “Nevertheless, the financial restoration continues to be in its preliminary stage, and there’s a want for our folks and companies to regain vigor.”
Hong Kong’s financial system is anticipated to see a rebound of three.5% to five.5% in 2023, after shrinking 3.5% in 2022, Chan mentioned.
In January, the worldwide monetary hub reopened its borders with mainland China, for the primary time in three years.
Hong Kong intently adopted China’s strict zero-Covid coverage till the center of 2022 when the town started to ease among the restrictions. In December, the Asian monetary heart dropped almost all of its Covid necessities.
“Domestically, the outbreak of the fifth wave of the epidemic early final 12 months and tightened monetary circumstances weighed closely on home demand,” mentioned Chan on Wednesday.
“However, with the native epidemic state of affairs stabilizing, and the federal government’s counter-cyclical measures and disbursement of consumption vouchers making key impacts, employment circumstances improved constantly.”
Price range handouts
As a part of the price range incentives, Hong Kong will hand out shopper vouchers value HK$5,000 ($637) per particular person to all adults this 12 months. That is half of what the federal government gave out within the earlier price range in 2022 — or HK$10,000.
The monetary secretary additionally introduced measures to cut back salaries tax by 100%, capped at HK$6,000. That is decrease than the cap set for the earlier price range.
Some economists beforehand raised questions on the effectiveness of the handouts in boosting financial restoration.
Nonetheless, William Ma of Develop Funding Group, mentioned these measures will definitely assist elevate home consumption.
“I feel the HK$5,000 … just isn’t [what] everybody anticipated coming in. And second plus the HK$6,000 tax lower — all this mixed, I consider [will] create a very good momentum for the home consumption restoration in [the first and second quarter],” Ma, advised CNBC’s “Road Indicators Asia” on Wednesday.
Hong Kong’s monetary chief additionally revealed plans to submit a legislative proposal within the second half of this 12 months, that can impose a minimal tax price of 15% on multinational firms with a world turnover of a minimum of (almost $800 million) from 2024-25.
With price pressures anticipated to extend alongside financial restoration, Chan predicted that headline inflation in 2023 will probably be at 2.9%.
Nonetheless, he famous that within the medium to long run, Hong Kong’s financial system will see “considerable alternatives.”
The federal government estimated that Hong Kong will see a price range deficit of HK$139.80 billion for the monetary 12 months 2022-2023. That is greater than its authentic expectation of about HK$56 billion.
Fiscal reserves will seemingly fall to HK$817.3 billion by the top of the monetary 12 months ending March 31, Chan mentioned.
— CNBC’s Lim Hui Jie contributed to this report