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June 19, 2024
PI Global Investments

HK Finance Chief Punts Target on Restoring Surplus to Decade End

(Bloomberg) — Hong Kong Financial Secretary Paul Chan backpedaled on projections the city would return to a surplus in the next fiscal year, as the Asian hub grapples with a ballooning deficit during a broad economic slowdown.

The city’s efforts to restore a balanced budget could now take until the back end of the decade, given the need to boost the economy and improve people’s livelihoods, Chan told city broadcaster RTHK on Saturday.

“It will take several years for us to restore fiscal balance,” he said. “The world’s major economies have all endured fiscal deficits for several years in a row since Covid.” 

Those comments contradicted his February timeline for the city’s consolidated account to return to the black in the next four fiscal years. That comeback was forecast to begin with a projected surplus of HK$9.6 billion ($1.2 billion) for the 2024-2025 year, according to numbers released with his last budget.  

“Now it may take a few more years, but our direction doesn’t change,” he said over the weekend, while characterizing the previous target for restoring a surplus as between April 2025 and 2027. 

A spokesperson for the Financial Secretary’s office said he had no further comment.

Chan’s forecast reflects the challenges facing Hong Kong, as a property crisis and weak demand in mainland China drag on the city’s economy, which has shrank in three of the past four years. Its budget shortfall for the current fiscal year could surpass HK$100 billion, Chan said in November, almost doubling government projections at the start of 2023.

The shift to a more gradual pace of fiscal balance would be in line with the International Monetary Fund’s recommendation. Chan’s comments come as Hong Kong is seeking public consultation on its budget for the next fiscal year, which will be announced next month.  

The finance chief’s budget will need to please an audience looking for a economic upturn, and lure businesses, talent and capital from rival finance hubs such as Singapore. In November, Hong Kong lowered its economic growth forecast for 2023 to 3.2%, from between 4% and 5%.

Chan wrote he’s “determined” to restore fiscal balance, in his weekly blog published Sunday, adding: “We can’t be too slow, and we can’t be too hasty, either.”

©2024 Bloomberg L.P.

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