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The following is the "Letter to Hong Kong - Budget 2009-10" by the Financial Secretary, Mr John C Tsang, broadcast on Radio Television Hong Kong this morning (March 8):
My Fellow Citizens,
Since I delivered my second Budget about 10 days ago, we have had further reminders that the global economy will get worse before it gets better.
Although our own economic numbers still compare quite favourably with others, people understand that our economy is being battered by the worst global financial crisis in living memory, and during these difficult times, we must all make compromises.
It is impossible to predict accurately at this juncture how long the current global economic slump will last, or how quickly we will recover. What is certain, however, is that it is vital for us to err on the side of caution, and prepare ourselves for even more shocks ahead.
At the same time we must, and we will, do everything possible to keep the engines of our economy well oiled and operating smoothly.
In my Budget, I announced that the government will keep our spending at a high level, totalling over $300 billion this year. It is a counter-cyclical approach to help stem the economic downturn.
Some have suggested that our spending has, indeed, contracted compared with last year, but I do not think that it would be fair comparison because we had last year over $66 billion worth of one-off concessions which skewed the situation. Compared with 2007-08, even though the growth in GDP over the period was only 1.8%, our spending grew by nearly 20%. Take social welfare, for example, our spending grew by 19.2%.
This complements the stimulus measures and concessions announced in the previous Budget, and the relief package announced by the Chief Executive in July last. The total value of these earlier measures amounts to some $57 billion, which is equivalent to 3.4 per cent of our GDP in 2008.
Some relief measures remain in effect, such as lower tax bills, electricity subsidies, food assistance measures and a freeze on government fees and charges.
This year, we anticipate a deficit of almost $40 billion. The deficit situation will continue for the next few years, in fact, throughout the medium range forecast period up to 2013-2014 with an accumulated deficit of $100 billion over the period, or about 20 per cent of our fiscal reserves.
Some people have questioned whether the Budget goes far enough with its spending plans and relief measures. At this point in time, I firmly believe that, yes, it does go far enough.
We have worked hard to strike a careful balance between stimulating the economy and helping homeowners pay their bills, putting a little extra money back into the pockets of workers and promoting a caring community.
Given the wild unpredictability of global markets, we simply don’t know what further complications our economy will face.
Because the global economic crisis is still evolving – and evolving quickly – I will constantly review the situation. As I have indicated in my Budget, I will provide an update on the economy in the middle of this year.
Depending on the economic conditions at that time and the possible risks involved, I may need to consider whether additional assistance is required to help the community weather the storm.
In the process of preparing my Budget, I heard a lot of concern from people about jobs. Indeed, the employment situation has been the top priority for the government for some time now.
In the Budget, I announced measures to create about 62,000 employment and internship opportunities. These positions are part of a concerted and ongoing effort.
You may recall that last December the Chief Executive announced measures to create more than 60,000 positions this year, mainly through infrastructure development and civil service recruitment.
Taken together, creating more than 120,000 jobs and internships in the current economic climate is a tall order, but it can, and will, be done.
Our unemployment rate is currently 4.6 per cent, and we do expect it to rise in the months ahead.
The 120,000 positions will not solve all our problems, but it will go some way to help alleviate the anticipated worsening job situation.
Our overriding goal is to stabilize the economy. That is why jobs created by the government must, as far as possible, help to stimulate economic growth and ensure a dynamic and sustainable future for our city.
By bringing forward construction projects that are already in the pipeline, we can provide jobs and, at the same time enhance our infrastructure in order to facilitate the economic rebound when it does come.
Creating jobs that will smarten-up the city, improve the environment and attract tourists and event organisers will also have a positive impact on the broader economy in the near-term as well as the longer-term.
Once the economy begins to recover, I see new opportunities in developing high-tech and creative industries, as well as a green economy. Although the revenue intake will shrink next year, government spending will not.
At the same time, with so much uncertainty in the air, we cannot risk exhausting our ammunition so fast that we limit our room to manoeuvre in the months ahead.
Later this year, Hong Kong will proudly host the East Asian Games. The efforts and sacrifice of the athletes who will be taking part in these events are not unlike the challenges that many people are facing today in our community.
We need time. We need patience. We need faith in our abilities to excel. And we need to pace ourselves to stay in peak form for the rest of the run.
That is why I hope and believe that if we can all put in some extra effort now, we will be much quicker off the mark once the global economy begins to recover.
Have a great Sunday.
John Tsang
Ends/Sunday, March 8, 2009
Issued at HKT 08:40
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