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Financial Secretary delivers 2019-20 Budget on 27 February 2019

Budget to support enterprises, safeguard jobs, stabilise the economy and strengthen livelihoods in Hong Kong

 

      Hong Kong's Financial Secretary, Mr Paul Chan, presented his 2019-20 Budget to the Legislative Council on Wednesday 27 February 2019.  This is the second Budget of the current-term Government, which has been prepared against the backdrop of profound changes in the global political and economic landscape, a complicated and volatile external environment and heightened uncertainties.

 

      Mr Chan forecast a fiscal surplus of HK$58.7 billion (EUR 6.6 billion) for 2018-19, the fiscal reserves are expected to reach HK$1,162 billion (EUR 130 billion) by 31 March 2019.  On the premise of ensuring the stability of Hong Kong's public finances, the 2019-20 Budget adopts a forward-looking and strategic fiscal approach with the aim of nurturing industries, supporting enterprises, enhancing public services, improving people's livelihood and investing in the future.

 

      Total government revenue for 2019-20 is estimated to be HK$626.1 billion (EUR 70 billion), while overall expenditure is estimated to be HK$607.8 billion (EUR 68 billion).

 

Economic Performance in 2018

 

      The global economy expanded throughout 2018, with stronger growth momentum during the first half of the year.  The momentum was checked by brewing trade tensions and other unfavourable conditions in the second half of the year.  Affected by the external environment, Hong Kong's total exports of goods had an annual growth of 3.5% in real terms, but the growth in the fourth quarter decelerated, resulting in a slight year-on-year decrease of 0.2%.  Exports of services also moderated in the latter half of the year, though an overall growth of 4.9% was recorded for 2018.  GDP grew by 3% for the year as a whole, still higher than the trend growth rate of 2.8% over the past decade.  The labour market remained tight, with the unemployment rate remaining at 2.8%, the lowest level in more than 20 years.  Netting out the effects of the Government's one-off measures, the underlying inflation rate was 2.6%, up by 0.9% point from 2017.  Headline inflation for 2018 was 2.4%.

 

Economic Outlook for 2019

 

      Looking ahead for 2019, the global economy, beset with considerable uncertainties and downward pressures, has abruptly turned from synchronised robust growth early last year to the current synchronised slowdown.  Market sentiment has become increasingly cautious.  The uncertain global economic outlook this year will restrain Hong Kong's economic performance.  Having regard to the latest internal and external developments, Mr Chan will make optimal use of the fiscal surplus for 2018-19 to introduce one-off measures to support enterprises and relieve people's burden.  Together with the stimulus effect of other measures in the Budget, he forecast economic growth of 2% to 3% in real terms for Hong Kong in 2019.  He forecast headline inflation and underlying inflation of about 2.5% each in 2019, compared to 2.4% and 2.6% respectively in 2018.

 
Develop a Diversified Economy

 

      Mr Chan unveiled in his 2019-20 Budget a raft of initiatives to promote economic development and diversify Hong Kong's economy to enhance competitiveness and overcome challenges posed by changes in the external economy.  Key initiatives are recapped as follows -

 

Financial Services Industry

  • Issue the first batch of government green bonds to promote the development of green finance
  • Consider establishing a limited partnership regime and introducing tax arrangement to attract private equity funds to set up and operate in Hong Kong
     
  • Promote mutual recognition of funds with other jurisdictions to broaden the distribution network of local fund products
     
  • Provide tax concessions for marine insurance and underwriting of specialty risks, and facilitate them to issue insurance-linked securities
     
  • Promote the use of Faster Payment System for payment of government fees and charges
     
  • Issue virtual bank licences
     
  • Establish the Academy of Finance in mid-2019 to promote financial leadership development
     
  • Provide a HK$400 million (EUR 45 million) seed capital for the Financial Reporting Council and enable it to waive levy in the first two years under the new regulatory regime

 

Innovation and Technology

 

  • Set aside HK$5.5 billion (EUR 615 million) for the development of the Cyberport 5 expansion project, which is expected to provide about 66,000 square metres of floor area, including offices, co-working space, conference venues and data service platforms
     
  • Set aside HK$16 billion (EUR 1.8 billion) for University Grants Committee-funded universities to enhance or refurbish campus facilities, including the provision of additional facilities essential for R&D activities
     
  • Inject HK$20 billion (EUR 2.2 billion) into the Research Endowment Fund of the Research Grants Council under the University Grants Committee to provide research funding
  • Allocate HK$800 million (EUR 89.4 million) to support R&D work and the realisation of R&D results by universities, key laboratories and engineering research centres
     
  • Launch the HK$2 billion (EUR 224 million) Re-industrialisation Funding Scheme in 2019
  • Expand the Corporate Venture Fund of the Science Park to HK$200 million (EUR 22.4 million)
  • Establish two innovative clusters in the Science Park focusing on "A.I. and robotic technologies" and "healthcare technologies", pooling top-notch universities and institutions to collaborate and undertake R&D activities

 

Others

 

  • Earmark HK$150 million (EUR 16.8 million) to support the development and initial operation of an online arbitration and mediation platform by non-governmental organisations with a view to enhancing Hong Kong's role as an international hub for legal services
  • Set aside HK$353 million (EUR 39.5 million) to enable the Hong Kong Tourism Board to expand its promotion of Hong Kong's image as a premier tourism destination
  • Consider introducing tax and related measures to attract ship finance companies to develop ship leasing businesses in Hong Kong
  • Provide a 50% profits tax concession to marine insurance businesses 
  • Inject an additional HK$1 billion (EUR 112 million) into the Film Development Fund
     

Support Enterprises and Alleviate People's Burden

 

  • Reduce profits tax for 2018-19 assessment year by 75%, subject to a ceiling of HK$20,000 (EUR 2,236)
  • Reduce salaries tax for 2018-19 assessment year by 75%, subject to a ceiling of HK$20,000 (EUR 2,236)
     
  • Provide one-off additional HK$1,000 (EUR 112) for Elderly Health Care Vouchers
  • Provide one-off grant of HK$2,500 (EUR 279) to students in need 
  • Waive rates for four quarters of 2019-20, subject to a ceiling of HK$1,500 (EUR 168) per quarter for each property 
  • Waive business registration fees for 2019-20
  • Inject another HK $1 billion (EUR 112 million) into the Dedicated Fund on Branding, Upgrading and Domestic Sales
  • Expand the networks of Free Trade Agreements, Investment Promotion and Protection Agreements, and Comprehensive Avoidance of Double Taxation Agreements as well as the network of Economic and Trade Offices to strengthen external promotion and assist Hong Kong enterprises in exploring new business opportunities

 

Promote a Caring and High-quality Living Environment

 

Housing and Land

  • About 100,400 public housing units will be produced over the next 5 years
  • About 93,000 private housing units will be provided in next 3 to 4 years
  • 2019-20 Land Sale Programme includes 7 commercial/hotel sites capable of producing 814,600 square metres of floor area 
  • Set aside HK$2 billion (EUR 224 million) to support non-governmental organisations in constructing transitional housing

 

Healthcare

  • Allocate HK$10 billion (EUR 1.1 billion) to set up a public healthcare stabilisation fund for any unexpected circumstances 
  • An additional HK$5 billion (EUR 559 million) to expedite the upgrading and acquisition of medical equipment
  • Additional recurrent subvention of HK$400 million (EUR 44.7 million) to expand the scope of the Drug Formulary
  • Designate HK$1.2 billion (EUR 134 million) to establish the Hong Kong Genome Institute and take forward the project to help promote the clinical application of genomic medicine and related innovative scientific research

 

Caring Society

 

  • Set aside HK$20 billion (EUR 2.24 billion) for the purchase of 60 properties to accommodate more than 130 welfare facilities
  • Allocate HK$200 million (EUR 22.4 million) to provide Wi-Fi service to welfare facilities, and encourage them to make use of technology products to enhance services 
  • Allocate HK$1.36 billion (EUR 152 million) for residential day-care and subsidise day care places for the elderly
  • Allocate HK$290 million (EUR 32.4 million) to strengthen rehabilitation services
  • Earmark HK$1.298 billion (EUR 145 million) to enhance services for toddlers, children and youths
  • Allocate HK$500 million (EUR 55.9 million) for IT innovation in schools
  • Allocate HK$200 million (EUR 22.4 million) to expand apprenticeship scheme for construction industry


Liveable City

 

  • Reserve HK$300 million (EUR 33.5 million) to develop a geospatial data-sharing platform and 3D digital maps of Hong Kong
  • Earmark HK$6 billion (EUR 671 million) to develop, expand and enhance promenades and open space on either side of Victoria Harbour 
  • Allocate HK$120 million (EUR 13.4 million) to expand public charging network for electric vehicles 
  • Provide HK$1 billion (EUR 112 million) for government departments to install renewable energy facilities
  • Set up a HK$200 million (EUR 22.4 million) Urban Forestry Support Fund to strengthen public education and promote arboriculture and horticulture trainee programmes 
  • An additional funding of HK$176 million (EUR 19.7 million) to host and arrange telecasts of large-scale, world-class performing arts programmes over the coming five years.

2019-20 Budget website 

 


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