Hong Kong could face Greek-style financial crisis, warn government advisers

Hong Kong could be as heavily indebted as Greece - facing a structural deficit of HK$1.54 trillion by 2041 - if the city's spending grows at the current pace and nothing is done to mitigate the impact of an ageing population, the government's fiscal advisers warned yesterday.

The deficit, accounting for almost 22 per cent of the nominal gross domestic product (not adjusted for inflation), would be even higher than the 10 per cent disclosed by Greek officials when they came clean about the true state of their country's public finances in 2010.

By that time, the advisers said, Hong Kong would have had to borrow HK$10.96 trillion to cover the sustained deficits experienced from 2021 onwards - about 15 times the existing reserves of some HK$750 billion.

The projections, released by the government-appointed working group on long-term fiscal planning, do not take into account the impact of the chief executive's target announced last year to build 200,000 public rental flats in the next decade and 5,000 subsidised flats a year.

The aggressive public housing programme would speed up the emergence of a structural deficit and depletion of fiscal reserves by three years, the group warned.

After the release of the report, Financial Secretary John Tsang Chun-wah said the city's finances were still sound but caution was needed.

"I do not think that the working group is pessimistic on the future of Hong Kong," he said.