Hong Kong is set to address a growing budget deficit and slower economic growth in its upcoming budget. Financial Secretary Paul Chan is expected to announce measures on February 28 to stabilize the economy and boost investor confidence.
“The government must balance fiscal discipline with economic recovery,” a finance ministry official said. Hong Kong’s economy has struggled with weak exports, a slow post-pandemic recovery, and declining property prices.
The city’s budget deficit is projected to reach HK$100 billion ($12.8 billion) for the 2023-24 fiscal year. This would mark the second consecutive year of deficits, raising concerns about long-term fiscal stability.
Hong Kong has relied heavily on land sales and property-related revenues, which have declined sharply. The real estate sector remains weak, with falling home prices and reduced demand from mainland Chinese buyers.
Financial analysts expect the government to introduce tax incentives and infrastructure spending to stimulate growth. Some economists warn that deeper deficits could limit Hong Kong’s ability to maintain low tax policies.
“The government must strike a delicate balance,” a senior economist at a Hong Kong-based bank said. He noted that excessive spending could weaken Hong Kong’s financial position in the long run.
Hong Kong’s economy grew by 3.2% in 2023, but momentum has slowed in recent months. The city’s key industries, including finance and tourism, have yet to return to pre-pandemic levels.
Retail sales have also been sluggish, with consumers cutting back on spending due to economic uncertainty. Rising interest rates have added pressure on businesses and households, affecting overall demand.
One major concern is the outflow of capital and talent. Political tensions and strict regulations have led some international firms and professionals to relocate to other financial hubs.
“Hong Kong must stay competitive,” a local business leader said. He urged the government to implement policies that attract investment and skilled workers.
The government may introduce relief measures to support businesses and low-income households. These could include tax breaks, subsidies, and rental assistance programs.
Tourism remains a weak spot in Hong Kong’s recovery. While visitor numbers have improved, they remain far below pre-pandemic levels, affecting hotels, restaurants, and retail businesses.
Efforts to attract more tourists include increased marketing campaigns and relaxed entry requirements for some travelers. However, global economic conditions may limit Hong Kong’s ability to regain its position as a top travel destination.
The stock market has also been underperforming, with investor confidence weakened by China’s economic slowdown. The Hang Seng Index has struggled to maintain gains, reflecting broader concerns over Hong Kong’s economic outlook.
China remains Hong Kong’s largest trading partner, and its economic slowdown has directly impacted the city. Slower Chinese demand for goods and services has hurt local businesses.
Some experts believe the government may consider issuing more bonds to raise funds for infrastructure projects. This could provide a short-term economic boost while improving Hong Kong’s long-term competitiveness.
Technology and innovation are areas where Hong Kong seeks to expand. The government has promoted fintech, biotech, and artificial intelligence as key growth sectors.
Despite economic challenges, Hong Kong remains a major financial center in Asia. Its low tax system, strong legal framework, and global connectivity still attract investors.
The upcoming budget will reveal whether the government prioritizes deficit reduction or economic stimulus. Businesses and citizens are watching closely to see how Hong Kong navigates its financial difficulties.
For now, Hong Kong faces a difficult balancing act. The coming months will determine whether the city can regain momentum or continue struggling with economic headwinds.
