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Convoying the economy with all-out effort
The fifth wave of COVID-19 epidemic has dealt a heavy blow to our citizens’ health as well as our society and economy. The latest unemployment rate (December 2021 - February 2022) rose to 4.5%, a notable increase of 0.6 percentage point over the previous period, and the largest increase in more than a year and a half. The number of unemployed persons reached 157 000. The underemployment rate also surged by 0.5 percentage point to 2.3%, the highest in more than half a year.
Affected by the severe epidemic situation and strict social distancing measures, the unemployment rate of the retail, accommodation and food services sectors combined rose sharply to 6.9%, 1.4 percentage points higher than the previous period. In particular, the unemployment rate for food and beverage service activities even surged by 1.9 percentage points to 8.1%.
Judging from the current situation, the economy will inevitably slip into contraction in the first quarter and the unemployment rate will worsen further rapidly. Entering the second quarter, the economic outlook will continue to hinge on the progress and effectiveness of epidemic control and prevention. The Government’s current anti-epidemic work is progressing at full steam around the principle of “three reductions, three focuses and one priority”. This means that reduction in the number of infections, severe cases and deaths are the important goals of the current phase. Meanwhile, more precise, stronger and more targeted measures should be applied to the “three focuses” (focused crowds, focused premises and focused areas), and support for the elderly must be accorded priority. The HKSAR Government will continue to strengthen coordination and cooperation among various departments, and make more effective use of the manpower and resources support provided by the Central Government and the Mainland to advance our epidemic control and prevention work. During the anti-epidemic period, the healthcare system has played a key role in safeguarding citizens’ health and life. I would like to express my heartfelt appreciation to the staff in the public healthcare system for their hard work. I would also like to express my sincere gratitude to the medical staff from the Mainland who came from afar to help Hong Kong. Let us work together to make Hong Kong stronger in our fight against the epidemic.
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The anti-epidemic work is a battle to curb the spread of the virus. It is also a battle of endurance. As General Secretary Xi Jinping emphasised, “perseverance is victory”. We must remain unswayed in execution, and at the same time organise and manage both the anti-epidemic work as well as the social and economic situation, and take more effective measures, in order to minimise the impact of the epidemic on the society and economy to the largest extent.
Indeed, the full control and containment of the epidemic relates to the life and health of citizens, while stabilising the economy with an all-out effort relates to enterprises’ business operations and citizens’ livelihoods. Both of them are the top concerns of our citizens. On stabilising the economy, we have guided the economy holistically since the onset of the fifth wave of the epidemic, aiming to support enterprises, particularly SMEs, with greater strength. SMEs account for 98% of the total number of enterprises in Hong Kong and employ 45% of the private market labour force. Supporting SMEs is the key to stabilising the vitality and resilience of the economy, and more importantly employment.
We have taken a multi-pronged approach to support SMEs, namely alleviating their operation cost, supporting cashflow and preserving employees. The measures include:
- Providing taxes and fees reduction to alleviate their operation cost;
- Enhancing the Special 100% Loan Guarantee product under the SME Financing Guarantee Scheme to increase the maximum loan amount per enterprise and extend the maximum repayment period, and introducing rental enforcement moratorium through legislation to provide SMEs with breathing space in cashflow;
- Assisting SMEs in preserving their employees and jobs through the new round of Employment Support Scheme (ESS).
After several adjustments and enhancements, we are now pressing ahead with the legislative work for the rental enforcement moratorium. Last Friday we published in the Gazette the Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Bill, which will be introduced into the Legislative Council (LegCo) for the First Reading and the Second Reading this Wednesday. We will work closely with the LegCo to support their scrutinising work, with a view to completing the legislative process as soon as possible.
The Chief Executive has recently announced a new round of ESS of some HK$20 to 30 billion to provide eligible employers of specified sectors subsidies of 3-month salary expenses, which is estimated to benefit more than 1 million employees. The Policy Innovation and Co-ordination Office is now working on the details of the Scheme, with an aim to open for application within April.
With these multi-pronged measures, we hope to tide more SMEs over this extremely testing time by enhancing their capabilities and confidence so that they would preserve their employees, which is in turn conducive to the preservation of economic vitality and an earlier economic recovery. As for the Consumption Voucher Scheme, it will be disbursed by two phases, while the first phase of $5000 voucher will be disbursed in next month, with a total amount of $30 billion. We hope that it would help alleviate people’s pressures under the epidemic, which could be beneficial to the businesses of SMEs at the same time.
To stabilise the local economy, external risks could not be overlooked. Under the influence of various factors such as downturn of prices of technology stocks, geopolitical tensions in Ukraine, interest rate hike and concerns over the coronavirus epidemic, Hong Kong stocks once plunged in tandem with external stock markets last week. Following the subsequent thematic meeting of the Financial Stability and Development Committee of the State Council hosted by the Vice-Premier Liu He, market confidence restored and local stock prices also rebounded. During the period of heightened volatility in the market last week, we had been monitoring market changes closely, so as to ensure orderly operation of different market segments, smooth settlement and clearing, and that there was no unusual behaviour that might significantly impact financial stability nor systemic risk. Overall speaking, there was no notable upsurge or increase in trading spread. While there was a rise in short selling, the aggregated short positions as a percentage of market capitalisation remained at 1.3%, which was comparable to the long-term average. There was also no concentration or building up of positions in the derivatives market. Despite the drop in market prices, no capital outflow was observed and the financial positon of brokerage firms could also cope with the market risks.
We are dedicating effort to strengthen people’s and enterprises’ confidence through multi-dimensional means. While different measures could help support the economy and secure employment in different ways, the most crucial factor is still the effectiveness and speed of our anti-epidemic work. The current local epidemic situation is still complicated and severe. The number of tested and reported positive cases has accumulated to over 1 million. Even though some patients may have already recovered, still we could not let down our guard. In face of this tough battle against the virus, as Xiao Baolong, the director of the Hong Kong and Macao Affairs Office of the State Council pointed out, with the relentless fighting spirit of the society, we will surely win this anti-epidemic war!
March 20, 2022
