Hong kong needs fiscal stimulus plan says imf

Hong Kong needs to start preparing a “significant and immediate" fiscal stimulus plan if the worsening European debt crisis threatens to drive the city into recession, the International Monetary Fund announced this week, with the residential property market spearheading any policy changes.

The Chinese city could “cut taxes, provide subsidies to the poor or roll back some property-cooling measures,” says the IMF. Hong Kong’s policy makers must be ready to react, even though a deepening crisis is a "low probability tail event," the IMF argues.

A proper recession in Hong King is "possible" as exports decline, the city’s Financial Secretary John Tsang said this week, and the government “will ease property curbs in the event home prices slump.”

"The risks to Hong Kong from the euro area have risen markedly in recent months," says the IMF. "As a highly open, international financial Centre, Hong Kong would be hit hard by a significant shock to external demand that would spill into Hong Kong through both trade and financial channels."

Source: OPP.org.uk