Hong Kong Finance Chief Warns Deficit to Double to HK$100 Billion
In a shocking revelation, Hong Kong’s finance chief Paul Chan has warned that the city’s budget deficit is set to double to a staggering HK$100 billion this financial year. This dire forecast comes as a result of a significant slump in the property market, which has severely impacted government coffers.
Property Market Slump
During a meeting with the Legislative Council (LegCo)’s panel on financial affairs, Chan disclosed that the deficit for the 2024/25 fiscal year is expected to more than double from the previously forecasted HK$48 billion back in February. This updated estimation marks the third consecutive fiscal year with a deficit surpassing HK$100 billion, following deficits of HK$122 billion in 2022/23 and HK$101.6 billion last year.
Chan emphasized that the ongoing slump in residential property prices has been a major contributing factor to the bleak financial outlook. Despite the government’s efforts to stimulate the market by eliminating extra stamp duties earlier this year, property prices have continued to plummet since mid-July. This downward trend has resulted in decreased revenue from land sales and stamp duty, exacerbating the deficit situation.
Revenue Shortfall
According to official figures, land-related transactions from April to October only generated HK$3.7 billion in revenue, significantly below the initial projections of HK$33 billion from land sales and HK$71 billion from stamp duties. Chan acknowledged that it will take several years of concerted efforts to steer the budget back into the black.
Amidst the economic challenges, Chief Executive John Lee recently announced relaxed mortgage rules to support homebuyers in financing up to 70% of a property’s value. These measures aim to alleviate the pressure on the housing market and stimulate economic growth in the face of the ongoing downturn.
Fiscal Strategy
In response to the looming deficit, Chan outlined a strategy focused on cost-cutting measures rather than seeking new revenue sources. He stressed the importance of fiscal consolidation through expenditure reduction and highlighted the government’s commitment to balancing the books in the coming years.
Despite the challenging economic landscape, Chan expressed optimism about Hong Kong’s resilience, particularly in light of potential policy shifts under the incoming US administration. He noted that the city’s currency peg to the US dollar would likely keep the Hong Kong dollar strong in the near future, providing a sense of stability amid global economic uncertainties.
As Hong Kong navigates through these turbulent times, the government remains steadfast in its efforts to address the financial challenges and chart a path towards sustainable economic recovery.
James Lee, a seasoned reporter at Hong Kong Free Press, brings a unique perspective to this unfolding story. With his background in journalism and firsthand experience covering the city’s evolving landscape, Lee offers valuable insights into the implications of Hong Kong’s escalating budget deficit and the broader implications for its residents. His dedication to reporting on critical issues facing the city underscores the importance of transparent and informed journalism in times of crisis.
