The HK Financial Secretary Paul Chan will deliver his 2020-21 Budget on 26 February. ANZ Research said the Hong Kong's government may propose a deficit budget of at least 4% of GDP.
With total fiscal reserves standing at 40% of GDP, the immediate issue facing policymakers is social stability, not sustainability. Furthermore, it is smaller than the proposed deficit of 5.3% of GDP in FY2003-04 in the wake of the SARS epidemic, said the research house.
ANZ believes the Budget should have little impact on the HKD's outlook. Fluctuations in
the HKD remains largely a function of financial market movements. While a possible reversal of short-term interest rate spread may push the HKD lower, its near-term outlook still depends on stock market flows.
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