Financial Secretary Paul Chan on Monday cautioned that the government will be prudent in its fiscal spending, as it looks for ways to boost economic recovery.

At a Legislative Council panel meeting, Chan maintained earlier government estimates that the local economy is expected to shrink by 3.2 percent for the year, with the underlying consumer price inflation reaching 1.8 percent.

He said he is optimistic about the economic outlook, noting improvements in economic activities in the fourth quarter and recent large-scale international events held in the SAR, such as the Global Financial Leaders' Investment Summit.

"If the external environment doesn't deteriorate, and if our local pandemic situation is under control, then our economy will gradually regain its impetus to grow next year," Chan told lawmakers.

However, he warned that the city's deficit could hit HK$100 billion for this financial year - far higher than the estimate of HK$56.3 billion in his February budget plan.

Fiscal reserves would fall to some HK$800 billion, amounting to about 11 months' worth of government spending, Chan added.

"We will allocate resources for work that has to be done, and we will be prudent and will ensure we live within our means, and we will spend where money is needed to ensure sustainability, and we must retain fiscal strength to cope with known and unforeseeable needs. We will continue to find new growth areas to increase our revenue, to consolidate and strengthen our economic recovery," he said.

Lawmaker Jeffrey Lam, from the Business and Professionals Alliance, asked if the government will roll out another round of the Employment Support Scheme. The financial secretary said conditions may not be suitable to do so.

"If limited resources are deployed where we can give direct help to members of the public, or if we deploy such resources to help enterprises, there may be different views in society," he said.

On whether to give the public electronic consumption vouchers again, Chan said while the earlier handouts helped stimulate the economy, they also cost a lot of money. He said the government will watch the market closely before making a decision on this.