(To watch the 2020-21 Budget speech with sign language interpretation, click here.)

While the rapid spread of COVID-19 is dealing a severe blow to Hong Kong’s economic activities and sentiment, Financial Secretary Paul Chan said the economy should be able to recover once the epidemic is over.

Delivering his 2020-21 Budget, Mr Chan said although the epidemic’s impact on the economy could possibly be greater than the 2003 SARS outbreak and the labour market is also subject to significant pressure, Hong Kong’s economic fundamentals remain solid and therefore core competitiveness will not be shaken.

He noted that the epidemic will also affect production and transportation on the Mainland and in Asia as well as the global supply chain operation. This will deal a further blow to the global economy.

Noting the development of US-China trade relations is the most significant uncertain factor facing the global economy, the financial chief said Hong Kong’s economic outlook is far from promising in the near term.

Having regard to the stimulus effect of the fiscal measures, he expected Hong Kong’s economy will grow by -1.5% to 0.5% in real terms in 2020.

He pointed out that subdued local economic conditions in the near term will contain the upward pressure on local costs. The moderation in residential rentals will also help lower overall inflation.

Therefore, he anticipated that the headline inflation rate and underlying inflation rate will ease to 1.7% and 2.5% respectively in 2020.

Mr Chan stressed that Hong Kong must strive to overcome constraints stemming from an ageing population, a dwindling labour force and land shortage.

The social incidents also reveal that conflicts still need to be addressed.

Balancing the various factors, he forecast that Hong Kong’s economy will grow by an average of 2.8% per annum in real terms from 2021 to 2024, slightly lower than the trend growth of 2.9% over the past decade.