Hong Kong’s ballooning deficit has prompted authorities to pledge spending cuts and other measures in the coming budget to bring down expenditures and help balance the books.
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The city’s deficit has reached record levels in recent years, ranking highly among developed economies.
The budgetary shortfall for the 2024-25 financial year is expected to reach nearly HK$100 billion (US$12.8 billion), more than twice of the HK$48 billion previously projected.
As finance chief Paul Chan Mo-po prepares for his budget speech on February 26, the Post breaks down whether Hong Kong is facing a “structural deficit” and whether taxing top earners can help get the city out of the red.
1. What is a structural deficit?
A structural deficit is defined as a persistent shortfall in a government’s budget, regardless of how well the economy is performing.
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It is caused by an underlying imbalance between a government’s revenue and expenditure. The result is often based on investments in areas such as social welfare, other public services and infrastructure development.