(Bloomberg) -- Hong Kong’s government is preparing to spend “boldly” to shore up the finance hub’s tumbling economy, Financial Secretary Paul Chan said in an interview.
Warning that unemployment is set to edge up, Chan pledged to maintain spending on infrastructure and public services. He said the government has the fiscal resources to offset the recession. The annual budget is planned for Feb. 26.
“We will continue to spend boldly to help those disadvantaged,” Chan told Bloomberg Television’s Yvonne Man.
He ruled out any changes to the Hong Kong dollar’s peg to the greenback.
“We have no intention to review it,” Chan said. There are “no circumstances” in which it would be reviewed, he said.
The comments come as the finance hub remains mired in recession after seven months of political unrest. Visitor arrivals from mainland China have more than halved, organizers have canceled conferences and consumer spending has tumbled. Unemployment is rising and expected to climb further.
The International Monetary Fund has urged the government to ramp up spending to support the economy. Business owners have called for more support amid little sign of a circuit breaker in the political dispute.
Chan said his government hasn’t decided about a cash handout.
The IMF has said Hong Kong’s economy likely shrank 1.2% last year and forecasts 1% growth in 2020. Chan expects the economy to have contracted 1.3% in 2019.
“Local social incidents caused serious disruptions to consumption-related activities and subdued economic prospects weighed on consumer sentiment,” according to a December government budget consultation document.
Chan announced a series of measures in response to the ongoing unrest over the course of 2019 worth about HK$25 billion. The stimulus has targeted businesses to various social groups and includes some tax breaks, one-time fuel and utilities subsidies, as well as support for children and the elderly.
Economists have criticized the government’s support measures as “peanuts.” The announced stimulus spending amounts to just less than 1% of Hong Kong’s GDP. The city’s fiscal reserve stood at HK$1.05 trillion as of October.
In his budget last year, which came before the protests, Chan outlined a series of relief measures costing about HK$42.9 billion that included tax breaks, investment in tech industries and other social spending. Chan currently forecasts a budget deficit for the year.
On calls from business owners for lower rents, Chan said the market will correct itself and he described capital outflows as broadly stable.
