Good morning, Hong Kong.
This time last year, I briefed you on the 2019-20 Budget, focusing, in particular, on the Government’s plans for harbourfront improvement. Our responsibility, I said then, was “clear and compelling: to preserve and protect it, while making it accessible for you, the people of Hong Kong.”


Today, my responsibility – the responsibility of the Hong Kong SAR Government – is no less clear or compelling. But it is far more immediate.
 
We are faced with a challenge unprecedented in its scope and destructive capacity, a danger both to the economy of Hong Kong and to our community. To each and every one of you.


I’m speaking, of course, about the daunting challenge of COVID-19, the coronavirus that has become a painful part of our lives over these past few months.
 
In hopes of lessening that pain, and the wide-ranging troubles associated with it, I turned to our fiscal reserves to help shape my 2020-21 Budget. Indeed, its central goal is to help support the companies of Hong Kong and safeguard jobs, while relieving the heavy burden that has befallen the people of Hong Kong.
 
My Budget is the latest in the substantial support that the Government has made available over these months. Since August last year, I have introduced relief measures totalling more than $30 billion.  And, just last month, a week before the Budget, the Government set up a $30 billion Anti-epidemic Fund to provide needed assistance for our companies and our people.
 
The Budget extends that support. It offers a 100 per cent loan-guarantee scheme for SMEs, reduces profits tax, rates for non-domestic properties, Government rental and fees.
 
Individually, it eases salaries tax, waives property rates and promises each Hong Kong permanent resident aged 18 and over a $10,000 disbursement. My hope is that it will boost consumption while, at the same time, offering you some financial relief.
 
To get the money to you as quickly as possible, I opted to make the eligibility criteria as simple and straightforward as possible. In that regard, I felt that a cash payout to permanent residents 18 and over would be the most efficient means of doing so. I aim to begin the handouts during summer vacation.
 
In view of the economic downturn, I have, as mentioned, launched a series of counter-cyclical measures resulting in a deficit budget.  While this deficit hits an all-time high, over $120 billion of the deficit is related to the cash payout scheme and other one-off relief measures.  Hence these will not result in long-term financial commitments.
 
On the other hand, the revenue for this financial year will include $19.5 billion from the issuance of green bonds and $22 billion brought back from the Housing Reserve. When that revenue, along with one-off expenditures, is deducted, the deficit drops to about $59 billion, which accounts for about two per cent of our GDP.
 
For the four financial years beginning in 2021-22, there will be an annual deficit of about $50 billion in the Operating Account.  However, if we look at the overall deficit in the Consolidated Account, it will range between $7.4 billion and $17 billion, which is indeed not a big sum in the context of an expenditure budget of some $700 billion.  In short, it’s too early to say that Hong Kong has entered a period of structural deficits.
 
That said, government expenditure will enter a consolidation period. As for future spending, we must be more mindful of the Government’s long-term affordability. Any increase in spending should also be in line with increase in revenue.

To increase our revenue, it is essential that we ensure the growth and vibrancy of our economy. Over the long run, we may need to consider revising tax rates or find new revenue sources. One-off relief measures may also have to be reduced progressively.

Still, despite the formidable challenges we face, I remain confident about the Hong Kong economy in the medium term. 

After all, Hong Kong is blessed with the singular institutional strengths of our “one country, two systems” framework. And our rule of law continues to enjoy international respect.
 
In addition, our longstanding advantages will continue to attract a world of business. I’m talking about our judicial independence, free and open society, unfettered flow of capital, people, goods and information, simple and low tax regime, strong talent pool and unique position in our nation’s economic development plans. 
 
These core strengths are immune to short-term economic fluctuations -- and crises, too. They underpin our status as a leading international financial centre and one of the best cities in the world for doing business.
 
No less important, the Mainland and Asia in general continue to offer huge, untapped, promise. This region will remain a key engine of global economic growth for years to come.
 
In particular, the Belt and Road initiative and the Greater Bay Area development present boundless prospects for Hong Kong.

And we must do all we can to realise those opportunities.

That’s why, in my Budget, I introduced a wide range of measures to boost our pillar industries, invest in new growth areas and encourage a steady flow of world-class talent, both locally and internationally.
 
I forecast that the Hong Kong economy will grow by -1.5% to 0.5% in 2020.  Following that, I forecast the growth will be 2.8% a year, on average, from 2021 to 2024.
 
This forecast has taken into account our economy’s track record over the past two decades. However, I would remain vigilant given the uncertain and volatile external environment.  I would also not underestimate the implications of the COVID-19 pandemic to the global economy.
 

But looking back at the challenges we have been through, I see the remarkable resolve and stamina as well as redoubtable adaptability and resilience of our people, in rebuilding Hong Kong, and making it a better place. And in all that, and more, I take confidence.
 
If we can work together, we can overcome today’s, and tomorrow’s, challenges. We can create a flourishing future for Hong Kong – a place we call home.
 
I am sure we can.