HONG KONG : Hong Kong’s government announced tax cuts and higher social spending Thursday to reverse a deepening economic slump aggravated by anti-government protests and the U.S.-Chinese tariff war.
The territory’s financial secretary, Paul Chan, cut this year’s official growth forecast to zero from 1%.
“The recent social incidents have hit the retail trade, restaurants and tourism, adding a further blow to an already-weak economy,” said a statement issued by Chan’s agency.
It also cited the impact of slowing trade in Asia, global financial market volatility and the risk of disorder as Britain leaves the European Union.
The measures announced Thursday will “provide impetus for our economy” and “help cushion the enterprises and people of Hong Kong against challenges,” the statement said.
The package will cost a total of 19.1 billion Hong Kong dollars ($2.4 billion), according to Chan.
Tourist arrivals fell 31% in the first week of August from a year ago, according to the territory’s secretary of economic development, Yau Tang-wah.
Retail sales slid 6.7% in June from a year earlier, according to the government. Retailers have told reporters they expect double-digit declines for July and August.
“There is a growing risk of an even worse outcome” if the confrontation between protesters and the government escalates, causing an outflow of capital, Julian Evans-Pritchard and Martin Lynge Rasmussen of Capital Economics said in a report.
The territory’s central bank has reserves to defend the Hong Kong dollar’s exchange rate, “but the city’s property market would be hit hard, resulting in a deep recession,” they said.