Hong Kong must prioritise cutting expenses and even consider raising taxes after authorities more than doubled their fiscal deficit estimate, observers have said, with some warning a reliance on land sales has become a structural problem.
Gary Ng Cheuk-yan, a senior economist with Natixis Corporate and Investment Bank, said the latest forecast highlighted the double whammy of the structural reliance on land sale revenue and slow economic growth.
“Hong Kong’s current fiscal model heavily relies on higher asset prices, but the tide can turn when consumer and business confidence head south,” Ng said.
“The government of course can borrow if there are the right projects. However, it will be better to cut unnecessary expenses and reallocate resources before considering tax rises and external financing.”
Chan said on Monday government revenue derived from land sales, stamp duty and corporate taxes had slumped.
