The Hong Kong government will spend more than 120 billion Hong Kong dollars ($15.5 billion) in the coming financial year to lift its economy, which has been in recession for two years.

“Hong Kong went through tribulations in the past two years,” Hong Kong’s Financial Secretary Paul Chan said in his budget speech on Wednesday.

“With the epidemic still lingering, our economy is yet to come out of recession,” he said, according to an official English translation of his Cantonese speech.

Hong Kong’s economy has suffered six consecutive quarters of contractions after battling multiple crises, including the U.S.-China trade war that intensified in 2018, months of pro-democracy protests in 2019 and the ongoing pandemic.

Over the past year, the government has increased spending — funded partly by drawing down its fiscal reserves — to help businesses and households cope with challenges posed by the Covid-19 pandemic.

That has also brought the budget deficit to a record high of 257.6 billion Hong Kong dollars ($33.2 billion) in the current financial year ending in March, said Chan.

The budget deficit for the coming financial year is estimated to be 101.6 billion Hong Kong dollars ($13.1 billion), he added. Chan announced measures that include the following for the coming year starting in April:

• Around 8.4 billion Hong Kong dollars ($1.1 billion) for procurement and administration of Covid-19 vaccines.
• About 9.5 billion Hong Kong dollars ($1.2 billion) worth of measures to support businesses, including a reduction in profits tax and waiver of business registration fees.
• For individuals, support include a reduction in salaries tax, loan guarantees and consumption vouchers worth 5,000 Hong Kong dollars ($645) for each eligible resident.

Hong Kong’s fiscal reserves are expected to be 902.7 billion Hong Kong dollars ($116.4 billion) by end-March, and could fall to around 801.1 billion Hong Kong dollars ($103.3 billion) in a year’s time, official estimates showed.

Hong Kong’s economy shrank 6.1% in 2020 — accelerating from the 1.2% contraction in the previous year, official data showed.

Chan said the city’s economy will return to growth this year. He said GDP is expected to expand by 3.5% to 5.5% this year, and an average of 3.3% every year from 2022 to 2025.

But progress of the economic recovery this year “will hinge on the development of the epidemic,” said the financial secretary.

“As cross-boundary movement of people and tourism activities take time to resume normal, the economy will still face significant challenges in the first half of the year,” he said in his budget speech.

Hong Kong started its Covid vaccination program this week. The government said last week it has purchased a total of 22.5 million doses of Covid vaccine — “sufficient” for everyone in the city.

With a population of around 7.5 million, Hong Kong has reported more than 10,890 cases of the coronavirus and 197 deaths as of Tuesday, official data showed.