Amid the ongoing severe COVID-19 pandemic, the Government should continue supporting grass-root residents, MSMEs (micro, small and medium enterprises) and the most affected industries, and consider launching consumer vouchers in due course. Give special attention to business environment before introducing new policies or regulations.
No one could have foreseen the long, huge and far-reaching impact of the Black Swan event that is COVID-19 on the world. At the time of writing this article, there were over 100 million confirmed cases worldwide, resulting in over 2.1 million deaths, and over 10,000 confirmed cases and 169 deaths were recorded in Hong Kong. Many places around the world are still intermittently implementing measures of varying degrees of social distancing and even locking down cities or the entire country to cope with the resurgent severe pandemic. As a result, the world economy has plunged into the worst recession since the Great Depression of the 1930s and contracted by 4.4% last year, according to estimates. Among the major economies, only China has recorded positive growth. Governments in various places have to spend enormous sums to save the economy and support people whose livelihoods have been greatly affected (especially grass-root residents) to maintain social stability, which is the duty of every government.
Emergence of vaccines brings a ray of hope
Various places have begun inoculation with several newly developed COVID-19 vaccines since late last year, bringing a ray of hope in the war against COVID-19. The International Monetary Fund also expects the global economy to return to growth of 5.2% this year. However, there are still many unknowns about how the pandemic will pan out. The World Health Organization has predicted that the fight against the epidemic remains a long way to go, and economic recovery still faces many uncertainties. In other words, the world will experience a period of darkness before dawn. Besides containing the pandemic, the most urgent task for various governments currently is how, given their own fiscal constraints and even high debts, to continue appropriately supporting businesses and people in dire straits to persevere until the break of dawn after the victory over COVID-19. The HKSAR Government is no exception.
To cope with the COVID-19 pandemic, the HKSAR Government has so far launched measures to combat the pandemic, support businesses, safeguard jobs and alleviate people’s hardship, which together amounted to over HKD300 billion, or about 11% of GDP. However, Hong Kong’s economy still shrunk by 6.1% last year due to the pandemic, according to estimates. There is nothing businesses can do, so they have to resort to layoffs, implement unpaid leave and furlough employees to reduce manpower expenditure. Unemployment stood at 6.6% and underemployment at 3.4% between October and December of last year. People are concerned that after the second tranche of the Employment Support Scheme ended in late November, without government support to pay salaries and with no improvement in sight for their business, SMEs may have to lay off employees or even close down around the Spring Festival, thereby triggering a domino effect. Currently, it can only be hoped that people’s daily life and various economic activities will gradually return to normal once the COVID-19 vaccines have been widely inoculated.
The fight against COVID-19 is still far from over
According to the latest estimation by the Government, Hong Kong can begin mass COVID-19 vaccinations in March, but when to reach what the experts refer to as the "herd immunity” threshold (i.e. 60%-70% of the population have formed antibodies through vaccination or natural infection) still hinges on a number of factors, including the thoroughness and smoothness of the entire vaccination schedule, the likelihood and extent of allergy cases occurring during the process, the public’s confidence in and acceptance of the vaccines, and the efficacy of the vaccines. In view of the unexpected incidents happening in countries such as the UK, Germany and the US where mass COVID-19 vaccinations have begun, e.g. failure to keep the vaccines at the required low temperatures during transportation and incidence of a few cases of severe allergies or even deaths after vaccination, Hong Kong must be vigilant and be prepared for possible situations.
Targeted assistance for MSMEs
In any case, the HKSAR Government’s latest projection is that Hong Kong’s economy is still unlikely to improve in the first half of the year and will only likely to have a strong recovery in the second half of this year. Given the ongoing severity of the pandemic, the Government should continue to provide targeted support for MSMEs to help them tide over the difficulties, and continue to introduce appropriate counter-cyclical measures, including strengthening support for the most affected industries, launching consumer vouchers at an appropriate time to stimulate consumption, and making special arrangements for businesses on taxation and government fees, such as moderate exemptions or granting deferred payment, etc. In addition, during these challenging times, the Government should take special care of the business environment before implementing new policies or regulations. For grass-root residents who are suffering from unemployment or underemployment, the Government should further strengthen the CSSA unemployment safety net and recruit more people to meet the need to implement anti-epidemic measures in addition to the planned 30,000 time-limited jobs. This will help not only boost employment, but also address the current manpower shortage for contact tracing as well as testing and quarantine arrangement, thereby improving the effectiveness of the fight against the pandemic.
To cope with the pandemic, Hong Kong’s fiscal reserves will likely drop sharply to the equivalent of 12 months of government expenditure this year, the lowest since reunification, and it will also face an unprecedented fiscal deficit of over HKD300 billion, which is indeed necessary to deal with carefully. The Government should examine the long-term sustainability of Hong Kong’s public finances and come up with optimization plans, and then study broadening the tax base for public discussion. At the same time, the Government must concentrate its resources and strive for zero infection so that the local and external economies can return to normal, and actively pave the way for future development by fully supporting Hong Kong people and Hong Kong businesses to participate in the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the region, proactively align with the Greater Bay Area and integrate into the country’s new economic development strategies of “internal circulation” and “dual circulation” to seek new growth drivers to generate income, supporting all strata to move steadily towards economic recovery together.
This is a free translation. For the exact meaning of the article, please refer to the Chinese version.
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