The financial situation in Hong Kong has elicited warnings of potential budgetary constraints from Finance Chief Paul Chan. The anticipated deficit for the next year is slightly over HK$100 billion, significantly surpassing the previous estimate of HK$57 billion. The public consultation for the 2024-25 budget has commenced, with Chan underscoring the necessity for prudent spending.
Furthermore, he cited the intricate and volatile global situation, indicating its potential to impede Hong Kong’s economic growth. The lingering impact of the pandemic on the asset market is expected to contribute to another deficit in the upcoming year.
The budget scheduled for February 28 will be geared towards promoting stability and delivering tangible benefits to residents. Chan has outlined plans to allocate resources for economic growth and development, freeze civil service headcount, and decrease departmental expenditures by 1% in the forthcoming financial years.
Moreover, efforts to enhance government revenue will involve deepening economic relations with the Middle East and Asean countries, as well as attracting innovation and technology enterprises to the city. Overall, Chan has stressed the necessity for long-term sustainable development and cooperative economic growth.
In contrast to Chan’s cautious projections, Hong Kong Monetary Authority (HKMA) chief Eddie Yue Wai-man has expressed cautious optimism about the city’s economic prospects. He highlighted the potential for a “soft landing” in the US economy, predicting interest rate adjustments by the Federal Reserve that would help mitigate inflation without causing a recession. Yue also pointed out signs of recovery in mainland China’s economy, particularly in industrial production, retail, and consumer sentiment.
Yue dismissed claims on mainland social media that Hong Kong had regressed as an international financial centre, emphasizing the continued resilience of the city’s banking system and stock market. He attributed the decline in proceeds from IPOs to global economic factors rather than capital outflows from Hong Kong.
Looking ahead, HKMA’s priorities for next year include promoting the internationalisation of the renminbi and advancing mBridge, a multi-central bank digital currency project. Additionally, Yue pledged to enforce stringent regulations for virtual assets, following a framework set by the Financial Stability Forum to prevent cryptocurrency-related fraud and enhance regulatory standards.
As the public consultation for the next year’s budget unfolds, it is evident that Hong Kong is facing economic challenges that necessitate meticulous financial management and strategic planning. The collaboration between the finance department and the monetary authority indicates a dedication to stabilising the city’s economy, despite the uncertainties ahead. Both officials have emphasized the need for resilience and forward-thinking to navigate the evolving global economic landscape.
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