Financial Secretary Paul Chan said on Wednesday that Hong Kong will see a budget deficit of HK$139.1 billion next year, accounting for 4.8 per cent of GDP.
This is more than double the record HK$63.3 billion deficit of 2004, a year after the city was hit by Sars.
Chan said Hong Kong, which has been reeling under an economic slump linked to a variety of reasons – from China-US trade to anti-government protests and coronavirus outbreaks – recorded a lower-than-expected budget deficit of nearly HK$38 billion for the last year.
This was the Hong Kong government's first deficit in 15 years, but Chan warned the city would see fiscal deficits for another four more years.
The deficit at HK$37.8 billion was smaller than many had feared, even though revenues from profits tax, salaries tax and stamp duties were substantially lower than originally forecast.
Expenditure for the past year was also up – HK$3.6 billion higher than originally estimated – mainly due to the setting up of the government's anti-epidemic fund.
Expenditure for next year is also expected to jump, by nearly 17 percent, as the government seeks to stimulate the economy and ease people's burdens. Recurrent expenditure will account for three-fifths of total spending – at over HK$280 billion.
Chan said the government's revenues can't keep up with the "drastic increases" in expenditure.
“Our current fiscal reserves of about HK$1,100 billion enable us to roll out special measures amid the prevailing economic downturn, such as paying out cash. Such special measures and the ever-growing expenditure, however, will deplete our fiscal reserves”, Chan warned.
He said the city also needs to consider seeking new sources of revenue, or revising tax rates.