23-2-2025 (HONG KONG) Hong Kong grapples with mounting financial pressures as the city-state confronts a series of substantial budget deficits, prompting financial experts to advocate for prudent spending cuts amid economic uncertainty.
The Asian financial powerhouse is weathering its most severe fiscal storm since the aftermath of the 1997 Asian financial crisis, with recent deficits dwarfing those of the previous era. The 2020-2021 fiscal year witnessed a staggering shortfall of HK$252 billion (US$32.4 billion), marking a concerning trend in the territory’s financial health.
Government data reveals a troubling pattern, with annual deficits surpassing US$20 billion in three out of the past four years. Financial Secretary Paul Chan acknowledged on Sunday that these deficits stem from “a complex web of internal and external challenges,” signalling that Wednesday’s forthcoming budget announcement will implement stringent controls on public expenditure.
Despite Chan’s earlier optimistic projection of achieving a surplus within “approximately three years,” former cabinet minister Anthony Cheung offers a more sobering assessment. “The current fiscal predicament extends beyond typical economic cycles triggered by the pandemic,” Cheung told AFP, drawing attention to Hong Kong’s lagging performance compared to regional competitors, particularly Singapore.
The territory’s financial woes have been exacerbated by a significant corporate and talent exodus, following Beijing’s implementation of sweeping national security legislation in 2020 and its response to anti-government demonstrations. This has dealt a severe blow to Hong Kong’s international standing and economic vitality.
While both Singapore and Hong Kong encountered substantial deficits during the pandemic’s peak in 2020, Singapore has demonstrated superior fiscal management, successfully maintaining spending proportionate to revenue as businesses relocate from Hong Kong, enabling the city-state to exceed its financial targets.
Cheung emphasises that Hong Kong’s challenge extends beyond mere budget balancing. The territory must establish long-term fiscal sustainability whilst navigating heightened US-China tensions and China’s economic deceleration. “We can no longer take Hong Kong’s geopolitical advantages for granted,” he cautions.
The situation represents a critical juncture for Hong Kong, whose mini-constitution mandates fiscal balance—a legacy of British colonial governance that championed minimal government intervention in market operations. Since its 1997 return to Chinese sovereignty, Hong Kong has maintained its low-tax regime, traditionally replenishing its reserves through substantial land-related revenues from property developers.
