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Fitch Says Hong Kong Deficit Won't Hurt Rating

by Mary Swire, Tax-News.com, Hong Kong

05 December 2002


Speaking at a Fitch seminar on Tuesday, director of Asian sovereign ratings, Brian Coulton announced that the territory's burgeoning budget deficit will not dent its credit rating.

What might affect the SAR's rating, according to the ratings agency, is the prospect of a 'messy exit' from the dollar peg arrangement. According to the Hong Kong Standard, which reported on the seminar: 'a badly handled abandonment of the present policy to fix the local currency to the US dollar could send interest rates higher, depress growth and send unemployment soaring.'

Playing down fears that the jurisdiction's budget deficit is likely to reach 7% of GDP this year, Mr Coulton outlined Hong Kong's strengths, and observed that:

'Clearly the fiscal deficit in Hong Kong's historical context looks terrible...and it's clear that (the government) will have to up taxes and cut spending significantly but it's important to remember where they started from. I find it hard to get too fazed about the fiscal situation per se in Hong Kong. If they have another four years of this (deficit), they'll have a government-debt-to-GDP ratio as bad as Australia's.'


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