"However, the economic recovery is still in its initial stage, and there is a need for our people and businesses to regain vigour." The city's economy is expected to grow 3.5%-5.5% this year after contracting 3.5% in 2022, Chan said. Underlying inflation is expected to hit 2.5%. Hong Kong will issue vouchers worth HK$5,000 ($637) per person to all adults this year, half the amount issued in 2022. Chan flagged tax rebates in salaries and profits taxes, capped at HK$6,000, lower than the caps set for the previous budget. STAMP DUTY "ADJUSTMENT" Amid weakness in property prices that fell more than 15% last year, the government also announced it would adjust stamp duties for first-time local home buyers, with a "view to easing the burden on ordinary families". Properties valued at HK$10 million and less will benefit. The measure would benefit 37,000 buyers and cost the government HK$1.9 billion. However, Chan said other demand side residential measures introduced over the past decade to cool one of the world's hottest property markets would remain unchanged. The Hang Seng Properties sub-index extended gains to as much as 1.3% in afternoon trade.
The sustainability of Hong Kong's fiscal reserves, however, remains a concern after authorities spent more than HK$600 billion containing the spread of COVID and providing relief for businesses and families struggling with pandemic restrictions. The budget shortfalls mean the public coffers would be depleted to HK$762 billion ($97 billion) in 2023/24 -- equivalent to 12 months of government expenditure -- around half the levels three years ago. Hong Kong usually runs balanced budgets or surpluses, since its pegged currency system commits it to fiscal prudence. "HAPPY" HONG KONG? The former British colony was returned to China in 1997.
Since China's imposition of a sweeping national security law in 2020 that critics say markedly curbed individual freedoms, hundreds of thousands of residents have moved away, bringing further uncertainty about the city's regional competitiveness. William Chan, tax partner at Grant Thornton in Hong Kong, said the boost from one-off relief measures would bes short-lived and proposed the government revitalise the economy to attract investment and talent. "Hong Kong is facing a shrinking workforce. Talent retention and attraction are critical to businesses and Hong Kong's development."
Analysts say exposure to a weakening global economy and the need to keep up with U.S. interest rate hikes to maintain the local currency's peg to the dollar will also lead to uncertainties over Hong Kong's economic recovery.
However, Financial Secretary Chan said the recent reopening of China's borders would alleviate some pressure, with business and logistics links normalising after COVID lockdowns. He cited a speech by China's leader Xi Jinping, urging Hong Kong to "break new ground and achieve another leap forward" in the next five years, despite economic, social and political upheavals.
Among other initiatives, the government will introduce a new
capital investment entrant scheme to attract talent.
($1 = 7.8488 Hong Kong dollars)
($1 = 7.8455 Hong Kong dollars)
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Excerpts-Hong Kong budget fir fiscal 2023/24 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Additional reporting by Jessie Pang; Writing by Marius Zaharia
and James Pomfret; Editing by Jacqueline Wong and Kim Coghill)
