Hong Kong urged to boost $2b economic stimulus

Some subsidies may drive consumption overseas or remain useless amidst the protests, argued Natixis.

The government’s $2b stimulus package designed to prop up the slowing economy is still “small and regressive”, according to Natixis.

Hong Kong recently announced its third round of fiscal measures, at the core of which are fuel subsidies and the expansion of rent cuts, which are amongst the most-impacted sectors amidst the ongoing trade tensions and social unrest. Measures on tourism are also expected to be announced soon.

But Natixis argues that these are “not strong enough to ease the cyclical pain (such as market sentiment and confidence) and tackle the structural problems (such as income inequality and health care).”

“It is true that the government support is now seemingly more targeted on the sectors most impacted by social unrest, such as transport, retail and hospitality...The problem is [that] these measures support corporates rather than the low-income population. This is once again a regressive package as income inequality remains a big problem for Hong Kong,” commented Natixis.

Some measures, such as fuel and airfare subsidies, may be all for naught if businesses remains stale amidst the ongoing protests, or may only serve to drive consumption away from Hong Kong.

“Fuel subsidies may not be relevant if there is no business. Rent cuts could be positive for corporates but it is highly uncertain on whether the sweetener will be passed to employees,” they argued.

Rebates on hotels for tourists may not even have any impact if the protests persists, added Natixis.

Natixis had previously argued for stronger fiscal measures to support Hong Kong’s growth given the “extremely different situation” it currently faces.