HONG KONG • Hong Kong is set to record its first budget deficit in 15 years, the city's finance chief warned yesterday, as the business hub reels from the twin shocks of the trade war and seething democracy protests.
In the latest grim assessment for the city, Financial Secretary Paul Chan told lawmakers that the economy was set to contract 1.3 per cent this year, hitting the city's usually bulging coffers.
Mr Chan blamed the 2019-2020 deficit on decreased tax revenues, a slowdown in land sales and recent economic sweeteners he unveiled in a bid to win over the public during a tumultuous year of unrest.
"At the end of the financial year, the SAR government will be in the red," Mr Chan said, using an abbreviation for the Chinese territory, the Special Administrative Region.
"Hong Kong's economy is now in extremely difficult times," he added, as he called for political violence to cease.
The city has been battered by nearly six months of protests triggered by rising public anger over China's rule and the police's response to protests.
Crowds are pushing for greater democratic freedoms and police accountability but the city's pro-Beijing leadership has refused any major political concessions.
The increasingly violent rallies have hammered the retail and tourism sectors, with mainland Chinese visitors abandoning the city in droves.
Figures released yesterday showed retail sales fell by a record 24 per cent in October, the fourth consecutive month of double-digit declines.
October is a crucial holiday period in China known as "Golden Week", when visitors from the mainland to Hong Kong usually spike and spend heavily. But this year, as violence escalated, the crowds fell a record 46 per cent that month.
Protests are not the sole cause of Hong Kong's woes.
The economy has also taken a pummelling from the US-China trade war in a city that serves as a crucial link between the authoritarian mainland and global markets.
The last time the city recorded a budget deficit was in the aftermath of a deadly 2003 outbreak of the severe acute respiratory syndrome virus that killed some 300 people.
The city's budget usually ends the year in an enviable position and successive fat years have built up an impressive cushion.
In March, the government said its reserves stood at HK$1.17 trillion (S$205 billion), with some critics saying successive leaders have not done enough to alleviate endemic inequality.
Confirmation of a deficit will do little to restore business faith in the hub, given that Beijing is offering no political solution to the crisis.
Hundreds of office workers in the business district gathered yesterday for the first of a week of lunchtime protests backing the pro-democracy movement after its resounding victory in district polls held last week in the Chinese-ruled city.
A day earlier police again fired tear gas to disperse thousands of protesters as they marched past the Kowloon waterfront, after first going to the US consulate on Hong Kong island to show gratitude for Washington's support.
There was no such confrontation at the two-hour rally in the central business district yesterday, as some people went back to their offices after their demonstration of solidarity. Others said they would be striking for the full five days.
The gathering in Chater Garden probably drew Hong Kong's best-dressed protesters, and organisers have called on them to come out every day this week.