Hong Kong's Financial Secretary Paul Chan Mo-po delivers the 2023-24 Budget in the Legislative Council on Feb 22, 2023. (PHOTO / HKSAR GOVERNMENT)

The government of the Hong Kong Special Administrative Region delivered a reduced relief package of HK$59.4 billion ($7.57 billion) to individuals and businesses in the 2023-24 Budget on Wednesday at a time when the SAR still needs an economic boost in the initial recovery stage.

“I welcome the budget’s stimulus initiatives targeting major economic sectors that will spur our revival, expand our capacity for growth and set a positive course for Hong Kong’s sustained growth,” Chief Executive John Lee Ka-chiu said in the Wednesday government press statement. “It has a well-balanced range of proposals that provide timely relief for individuals and businesses during these challenging economic times.”

The relief measures involve the disbursement of electronic consumption vouchers for a third straight year. The administration will issue consumption vouchers worth HK$5,000 to each eligible Hong Kong permanent resident and new arrival aged 18 or above in two installments (in April and midyear). Eligible people who have come to live in Hong Kong through different admission schemes or to study in Hong Kong will receive vouchers worth HK$2,500.

Other measures to alleviate the financial burden on individuals include, reducing salaries tax and tax under personal assessment for the year of assessment 2022-23 by 100 percent, and providing a rates concession for domestic properties for the first two quarters of 2023-24.

For enterprises, the relief package includes reducing profits tax in 2022-23 by 100 percent; and providing a rates concession for non-domestic properties for the first two quarters of 2023-24.

The budget also advances the aspirations of pursuing high-quality development in the innovation and technology industry such as in digital economy development, artificial supercomputing, microelectronics and Web3 ecosystem development.

For luring enterprises and talents, the SAR will introduce a mechanism to provide facilitation for companies domiciled overseas for redomiciliation to Hong Kong, and a new capital investment entrant scheme for attracting applicants to reside in the city after making investments in the local asset market, excluding property.

The government will also make preparations for establishing a Northern Metropolis co-ordination office, and commence consultation on the development proposals and land use planning of San Tin Technopole.

In delivering the first budget of the fifth-term of the SAR government, Financial Secretary Paul Chan Mo-po said “as overall economic sentiment improves in tandem with the revival of economic activities and the rapid return of Hong Kong’s exchanges with the mainland and the world to normalcy, private consumption and the number of visitor arrivals will increase,” while global macroeconomic headwinds such as the continued impact of monetary policy tightening and the Russia-Ukraine tension will still weigh on the economic recovery prospects.

“I forecast that the Hong Kong economy will see a visible rebound this year with growth of 3.5 to 5.5 percent. The economy will grow by an average of 3.7 percent per annum in real terms from 2024 to 2027, higher than the trend growth of 2.8 percent during the decade before the COVID-19 pandemic,” the finance chief said. Hong Kong’s economy shrank by 3.5 percent last year.

But even with a projected economic recovery, the city’s public finance situation is likely to remain in the red.

Because of lower-than-expected profits tax, stamp duty and land premiums as well as massive expenditure on anti-pandemic measures, the government revised its projection that it will record a deficit of about HK$140 billion for 2022-23, higher than the original estimate of about HK$56 billion. Fiscal reserves will dwindle to about HK$820 billion at the end of March this year.

For the next financial year (2023-24), the administration said it still expects to register a deficit, at HK$54.4 billion, with fiscal reserves hovering at around HK$762.9 billion at the end of March next year, equivalent to 12 months of government expenditure.