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Hong Kong has said it will consider legalising gambling on basketball and announced sweeping cuts to government jobs as the Chinese territory grapples with a years-long budget hole driven by a prolonged property slowdown.
The Asian financial hub is set to record a deficit of more than HK$87bn (US$11bn) for the year ending in March, financial secretary Paul Chan said on Wednesday. That would mark Hong Kong’s third consecutive year of shortfalls, its longest streak of deficits since 2004.
Hong Kong’s economy has been weighed down by slowing growth in mainland China in the wake of the pandemic and rising tensions with the US, which have hit the city’s traditional growth drivers, economists said.
“The unstable international geopolitical situation, escalated trade conflicts and elevated global interest rates exerted [an] adverse impact on local economic activities and confidence,” Chan said as he outlined Hong Kong’s budget for the coming financial year.
Officials on Wednesday said the government was considering legalising gambling on basketball, which could generate an estimated HK$1.5bn-HK$2bn in annual tax revenue. Currently, betting is only permitted on horseracing and football.
Chan also unveiled plans to cut about 10,000 jobs from Hong Kong’s civil service — roughly 5 per cent of its headcount — over the next two years and impose a pay freeze.
Economists have said Hong Kong’s low debt levels and HK$600bn of fiscal reserves — equivalent to about a fifth of GDP — provide a buffer against downturns. But they have also warned that new sources of revenue would be needed to maintain the territory’s vaunted low-tax status.
UBS and Natixis have forecast GDP growth of just 2 per cent this year, down from 2.5 per cent last year.
Land premium revenue — which developers pay the government for land use — is expected to drop to HK$13.5bn for the year ending in March, less than half of the government’s initial forecast. Other property-related revenue sources, including stamp duties from real estate transactions, also fell.
In an effort to encourage property transactions, Chan said stamp duties on home purchases valued at HK$4mn and below would be set at just HK$100, down from as much as 1.5 per cent of the deal value.
The government also announced a halt to commercial land plot sales for the coming year amid high vacancy rates, as well as a HK$1bn research and development institute for artificial intelligence and a new channel to fast-track listings of Chinese technology and biotech companies.
The city’s benchmark Hang Seng index rose more than 3 per cent on Wednesday.
“Gradually, we expect Hong Kong’s potential growth to be lower than in the past,” said Gary Ng, a senior economist at Natixis. “In the past, Hong Kong’s growth was based on the trade flow between the US and China. Right now, these two drivers are basically gone.”
Data visualisation by Haohsiang Ko in Hong Kong
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