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The Hong Kong government plans to spend HK$120 billion to alleviate the hardship and pressure caused by the coronavirus pandemic, Financial Secretary Paul Chan said in his 2021-22 budget speech on Wednesday.

The economy shrank 6.1 percent in 2020, which was the largest annual fall on record and also the first time for Hong Kong to log two consecutive years of contraction.

Taking into account the internal and external situations as well as the stimulus effect of the fiscal measures, the economy is projected to grow by 3.5 percent to 5.5 percent this year.

The economy will grow by an average of 3.3 percent per annum in real terms from 2022 to 2025, while the underlying inflation rate will average 2 percent, Chan said.

After two consecutive years of contraction, overall economic activities will remain below the pre-recession level this year and should not pose notable pressure on local costs, he noted. Inflation and the underlying inflation will be 1.6 percent and 1 percent, respectively this year.

In order to stimulate local consumption, the government will issue vouchers worth HK$5000 to each residents.

The government has allocated HK$9.5 billion to support enterprises. Chan reduced profits tax for the assessment year 2020-21 by 100 percent and provided rates concession for non-domestic properties for four quarters of 2021-22.

Further, business registration fees for 2021-22 were waived, which is likely to benefit 1.5 million business operators.

The government has introduced a number of enhancements to the SME Financing Guarantee Scheme.

In 2020-21, the government created about 31,000 time-limited jobs in the public and private sectors. Chan proposed to further allocate HK$6.6 billion to create around 30,000 time-limited jobs for a period up to 12 months.

He raised the stamp duty on stock transfers to 0.13 percent from the current 0.1 percent.

Chan said that the fiscal deficit will be HK$101.6 billion next fiscal year, accounting for 3.6 percent of GDP, due to the counter-cyclical fiscal measures. The operating deficit for 2021-22 will be more than HK$140 billion, he added.

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