'Deficit Expected To Hit Almost HK$258 Billion'

The Financial Secretary, Paul Chan, said he expects Hong Kong to report a deficit of HK$257.6 billion in the current financial year, with the fiscal reserves expected to stand at HK$902.7 billion by March 31 2021.

While delivering his annual budget blueprint on Wednesday, Chan also warned that even though the local economy is expected to gradually improve, he still expects the fiscal deficit in this coming financial year to hit HK$101.6 billion.

“In the past year, we have increased government expenditure substantially to combat the epidemic and roll out relief measures, which resulted in our fiscal reserves dropping sharply in two years from the equivalent of 23 months of government expenditure to 13 months,” he said.

“Although I forecast an improvement in revenue for the next financial year, I expect that the fiscal deficit will be HK$101.6 billion, accounting for 3.6 per cent of GDP, due to the counter-cyclical fiscal measures and the continued increase in recurrent expenditure. In other words, Hong Kong will record a deficit for a number of years after achieving a surplus for 15 years.”

The financial chief said the estimated recurrent expenditure on education, social welfare and healthcare will account for 58 percent of government recurrent expenditure, or HK$302.3 billion in the coming financial year.

He added that in order to rein in government spending, officials are aiming to freeze hiring in the civil service.

"The Civil Service Bureau has encouraged departments to enhance effectiveness through re-prioritisation, internal redeployment and streamlining of work processes, so as to cope with the workload," he said.

Looking ahead, the financial chief also warned that the SAR will likely continue to suffer from a deficit over the next few years.

"The operating deficit for 2021-22 will be more than HK$140 billion mainly due to the counter-cyclical measures while the operating deficit for the remaining four years will range from $22.4 billion to $40.7 billion. The Consolidated Account is also expected to record a deficit for four consecutive years. The above forecast has not yet taken into account any tax rebate or relief measure that the Government may implement in the future," Chan said.