Hong Kong finance chief warns of challenges from fiscal deficit

HONG Kong Financial Secretary Paul Chan warned that a fiscal deficit will present an obstacle to the city’s recovery from the pandemic.

“After three years of the pandemic and a weak external economy, a high fiscal deficit has accumulated so the economic recovery still needs to be consolidated and investment in the future needs to be supported,” Chan wrote in a blog post on Sunday (Feb 19).

He added that the city “is on the road to normalcy and the economy is regaining momentum”.

The comments come before Chan delivers a budget presentation on Wednesday as part of efforts to chart a course for a rebound.

Hong Kong’s economy contracted last year for the third time since 2019 due to slowing global demand, rising interest rates and a prolonged exit from isolating Covid curbs.

Gross domestic product fell 4.2 per cent in the October-to-December quarter from a year earlier, advanced figures from the Census and Statistics Department showed earlier this month. The drop was worse than economist estimates, though not as severe as the third quarter’s 4.6 per cent decline.

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For the entire year, the economy shrank 3.5 per cent, more than estimates for a contraction of around 3 per cent among economists and the government. BLOOMBERG