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Providing full support for economic recovery

With the COVID-19 epidemic lasting for more than a year, Hong Kong’s economy and enterprises have been seriously affected. Although our economy once improved in Q3 last year, it has been disrupted by the fourth wave of outbreak since November last year. The latest unemployment rate has hit a 17-year high of 7.2%. Fortunately, the epidemic has shown signs of subsiding recently and we hope this trend could continue. Learning from the anti-epidemic experience around the world over the past year, we can see that repeated outbreaks of the epidemic would cause serious disruptions to social and economic activities, and bring immense pressure to low income group in particular.

Economic recovery is only possible if we can contain the epidemic. The anti-epidemic experience in the Mainland since Q2 last year was a successful showcase. With the policy measures from the Central Government and the support of the public, the epidemic has been curbed swiftly and the economy has seen a strong rebound. Mainland’s target economic growth rate this year has been set at 6% or above. As the second largest global economy with an annual GDP of more than 1 trillion RMB, the robust growth of our Country’s economy could provide a major driving force for the recovery of the weakened global economy.

I believe economic recovery is the global trend this year. The threat of the epidemic could be gradually eased by mass vaccination programmes launched around the globe. With the easing monetary policies and the large-scale fiscal stimulus adopted by different governments, it is expected to give a stronger push for global economic recovery in the latter half of this year. In the first two months of 2021, Hong Kong recorded an increase of 37.6% in value of total exports of goods, a big leap from the drop of 12% recorded in the same period of last year. We expect the full-year performance on goods exports will be pretty good. As regards exports of services, its recovery largely hinges on the pace of cross-boundary travel resumption.

Although there is a glimpse of hope ahead, many are still facing real difficulties at this moment. This explains why even against the backdrop of huge fiscal deficit for two consecutive years, I still pressed ahead for countercyclical measures of a scale of more than HK$120 billion in my Budget announced last month, with a view to providing further support to enterprises and individuals in need.

For enterprises, liquidity support is crucial. We therefore launched the Special 100% Guarantee Product in April last year to assist enterprises hard hit by the epidemic and having suffered decline in sales turnover in coping with cash flow problems by providing them with loans with 100% Government’s Guarantee through the Hong Kong Mortgage Corporation Insurance Limited (HKMCI). In less than a year, 28 000 applications with a total loan amount of HK$45.3 billion have been approved, involving over 260 000 employees. Moreover, the enhancement measures announced in my Budget last month will come into effect tomorrow. After the enhancement, the scheme will extend to cover enterprises newly set up at the beginning of the COVID-19 outbreak, i.e. Q1 2020. The maximum loan amount per enterprise will be increased from the total amount of employee wages and rents for 12 months to that for 18 months, and the loan ceiling will be raised from HK$5 million to HK$6 million. Also, the maximum repayment period will be extended from five years to eight years, and the maximum duration of principal moratorium will be extended from 12 months to 18 months. Enterprises which have borrowed loans under the original scheme can also apply for an increase in loan amount, extension in repayment period and duration of principal moratorium through their banks. Together with the 80% and 90% Guarantee Products enhanced in 2019, the SME Financing Guarantee Scheme has already benefitted more than 35 000 enterprises which employs over 560 000 employees together as at end February this year.

The labour market in Hong Kong has been deteriorating since the fourth wave of outbreak. In order to provide a supplementary financing option for the unemployed with financial difficulties, I announced in my latest Budget the setting up of a time-limited 100% Personal Loan Guarantee Scheme (PLGS). The Government will provide a total guarantee commitment of HK$15 billion to provide eligible borrowers with loans at a concessionary interest rate. Thanks to the approval of the LegCo Finance Committee, the funding proposal of the Scheme was endorsed last Friday. We will continue to work with HKMCI and the banking sector on the detailed arrangements, with the aim of launching the Scheme in next month.

Under the PLGS, Hong Kong permanent residents aged 18 or above are eligible to apply, provided that they have been unemployed for at least two months at the time of loan application and can demonstrate cessation of main recurrent incomes from employment in Hong Kong. Self-employed individuals, free-lancers, gig or casual workers are also eligible upon the production of a declaration of unemployment and demonstration of a loss of main recurrent incomes. Applicant may receive a maximum loan of up to six times the average monthly income for any three months within the designated period, subject to a ceiling of HK$80,000. The maximum repayment period is six years, with an option of principal moratorium for the first 12 months. The effective interest rate will be fixed at 1% per annum, while the borrower will receive a full rebate of the interest after the loan is fully repaid by the end of the repayment period.

Given that the Scheme aims to provide relief in this testing time, we will keep the application criteria simple and clear. Banks participating in the Scheme will consider the loan applications with due diligence according to their professional judgement. As the banks need not bear the risk of defaulted loans, we believe they could handle the applications more effectively.

Apart from providing a supplementary financing option for the unemployed through the PLGS, we will also make our best efforts to create more jobs through other measures. For instance, the latest Budget proposed to further allocate HK$6.6 billion to create around 30 000 time-limited jobs. In addition, in the light that many grassroots have been suffering from underemployment amid the epidemic, the Government has proposed to relax the working hour requirements under the Working Family Allowance Scheme. This includes lowering the current basic working hour requirement of not fewer than 144 hours per month for non-single parent households substantially by half for one year. The proposal has just been approved by the Finance Committee and will be implemented in June.

The SAR Government will endeavour to push ahead with our anti-epidemic work including the mass vaccination programme. We need support from your all in order to achieve herd immunity. Only by doing so, a stable environment could be created for the speedy recovery and sustainable development of our economy. I have been feeling good after receiving the first dose of the vaccine some weeks ago, and am going to get the second jab this week. Let us join hands in fighting the epidemic, riding out of the storm and taking us to the road to economic recovery and normal life.

March 28, 2021