Will Hong Kong's deficit hurt property prices

The government has announced a stunning budget deficit for the first four fiscal months, raising concerns that it will have to increase land sales to plug the hole.

Hong Kong's Special Administrative Region SAR government is under renewed pressure to cut its budget deficit. In the first four months of this financial year, from April to July, it racked up a shortfall of HK$40.1 bn $5.15 billion. This amount is equivalent to 89% of its projected total deficit for the full year. Given the soft economy, this full-year budget deficit will certainly overshoot the official target of HK$45.2 bn $5.8 billion the Financial Secretary announced in his Budget in March.

The SAR's economic growth in the second quarter was only a tepid 0.5%. The outlook for the rest of the fiscal year, which runs through March 2003, and next...

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