Hong Kong to give enormous allowances to its residents as economy unwinds from COVID-19
On Wednesday, February 26th, Hong Kong's leadership announced that it will give out HK$10,000 (US$1,280) allowances to seven million permanent residents in an effort to resuscitate a downturned economy, which has further recessed by the effects of the COVID-19 contagion.
The recession-boosting handout was unveiled by HK Finance Secretary Paul Chan via the annual budget, which has allocated HK$120 billion to the cause.
Although the recent recession has been the worst that the city-state has seen in the last ten years, Hong Kong can pride itself on having a monetary reserve of over HK$1 trillion, which has been steadily gathered while the economy was it its surplus stages. This reserve is exactly where the handout money will be coming from.
The allowances by themselves will cost the government HK$71 billion, but government specialist trust that customers will spend the lion’s share of the cash on local business, which will boost local economy.
"Making good use of fiscal reserves to support enterprises and relieve people's hardship is certainly in line with our people's expectations," said Mr. Chan.
Hong Kong's economy is still limping as a result of the US-China trade war, lengthy stretches of protests and now the coronavirus: a triple shot to the gut which Chan portrayed as "exceptionally austere".
Aside from just handing out money to residents, other strategies have also been outlined in the budget, including tax breaks on income and low interest business loans as companies struggle to pay their employees their salaries.
Sectors including retail, tourism, and food establishments have felt the brunt of the economic effects, as shown by a spike in bankruptcies and unusually high unemployment rates.
"Hong Kong's economy is facing enormous challenges this year," Chan said, as he estimated a range of 0.5% growth to a 1.5% contraction in 2020.
A week ago Hong Kong's administration allocated HK$30 billion to help subsidize those hit hardest by the economic effects of the coronavirus, including allowances for organizations in the hospitality, travel and restaurant industries.
Mr. Chan said the city-state is on the path to hit a record high deficit in 2020, its first in over a decade. The previous Hong Kong recession was recorded between the years 2001 and 2004, but Mr. Chan said the financial reserves should be enough for the city to get through the present emergency circumstances.
"In the medium term, the economic outlook of Hong Kong remains positive," he said.