Hong Kong may release more financial stimulus packages in 2020

Fiscal deficit of 9.5% of GDP to be expected this year due to additional spendings.

More stimulus spending in Hong Kong is anticipated before end-2020 as the city and the rest of the world are expected to sink into recessions, according to a Fitch Solutions report. However, further stimulus packages will be smaller and will focus on reducing business costs, stabilising employment, and supporting consumption.

A fiscal deficit equal to 9.5% of GDP is also to be expected in 2020, from 5.2% previously, This is in light of the additional $37.5b spending earmarked in the stimulus package announced on 6 April.

The Hong Kong SAR government announced on 8 April a further stimulus package worth $137.5b bringing the total stimulus spending to $286.4b or around 10% of 2019 GDP.

$80b will be allocated to subsidise the salaries of all private sector workers, whilst $21b will go towards sectors hard-hit by the pandemic such as aviation and tourism.

The government also aims to create 30,000 jobs over the coming two years, increase the rent discount for tenants of government properties to 75% from 50%, and share the costs with a 20% MTR fare reduction for six months starting in July.

Fitch believes that these wage subsidies and business cost reduction will slow down business closures and reduce job losses.

However, Hong Kong workers are likely to see steep reductions to disposable income even if they keep their jobs thus any additional stimulus spending will include measures to shore up wages or increase cash handouts.