Hong Kong’s government said it would dole out $15.4 billion in cash payouts and other stimulus in its annual budget in an attempt to resuscitate an economy reeling from the coronavirus epidemic and months of antigovernment protests.

The city will give each of its adult permanent residents 10,000 Hong Kong dollars ($1,284) in cash—a $9 billion combined payout—and slash salaries tax for close to two million workers, Financial Secretary Paul Chan said Wednesday. He also announced tax breaks and financial aid for companies.

“The rapid spread of the novel coronavirus has dealt a severe blow to economic activities and sentiment in Hong Kong,” Mr. Chan said in a budget speech. He said an “exceptional measure” was necessary to encourage consumer spending and ease financial burdens on individuals and domestic businesses.

Hong Kong’s economy contracted 1.2% in 2019, its first annual recession since the global financial crisis a decade earlier. Regular protests that started in the middle of the year and at times escalated into violent clashes between demonstrators and police led to steep drops in tourism and retail sales and saw business events canceled. The U.S.-China trade war also damped import and export volumes and business sentiment in Hong Kong, which acts as a gateway into China.

The city is now facing the prospect of a protracted recession. Mr. Chan said Hong Kong’s economy could contract by as much as 1.5% in real terms in 2020, or grow by 0.5% in an optimistic scenario.


The novel coronavirus, which causes a disease known as Covid-19, was first identified in December in the central Chinese city of Wuhan. It has since spread to many parts of the world, leading countries and cities to impose border controls that have severely curtailed tourism and business travel. There have been more than 80,000 confirmed cases world-wide, of which more than 2,700 people have died, mostly in mainland China.

Hong Kong has so far reported 89 coronavirus cases and two deaths. The city has closed schools, government offices, major tourist attractions and public facilities such as libraries and swimming pools to discourage people from congregating. The city’s Disneyland theme park has been closed since late January, and hotels, restaurants, shopping centers and indoor playgrounds are suffering from steep sales declines. Some have laid off employees to reduce their overhead costs, pushing the unemployment rate in the food-and-beverage services sector to 6.1%, an eight-year high.

Hong Kong, with a population of 7.5 million, is Asia’s biggest and busiest financial center, where many investment banks and companies base their regional headquarters. The $9 billion in cash payouts will go only to Hong Kong permanent residents, including those who live abroad.

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Mr. Chan said approval for the budget package is needed from the city’s Legislative Council. It also includes relief measures for lower-income residents and the elderly, and support for the health-care system and smaller businesses, and comes ahead of September’s Legislative Council elections.


He said that he expected the city’s fiscal deficit for next year to reach a record, justifying the need to dip into reserves to support businesses and relieve people’s hardship.

Hong Kong’s government is deeply unpopular following its handling of protests last year. While it pulled a proposed bill that would have allowed extradition to China, which sparked the unrest, it hasn’t signaled any intention to yield to broader demands that include a call for democratic elections for the city’s leader.

Pro-Beijing parties were routed at district elections late last year and have been pressing the government to support the economy ahead of the more significant legislative elections in the fall.

People wearing face masks visit the lookout of Victoria Peak in Hong Kong this week. Photo: isaac lawrence/Agence France-Presse/Getty Images

Regina Ip, a pro-Beijing lawmaker and a member of Hong Kong’s Executive Council, said her New People’s Party welcomed the plan “to make use of the government’s rich resources to provide relief measures for Hong Kong’s current difficulties.”


However, she said, it failed to provide stimulative measures for long-term economic growth and solutions for economic inequality.

Mrs. Ip said she doesn’t think the massive handout would have much impact on voters at the Legislative Council elections. “These are two different things,” she said. “With or without an election, the government is supposed to help its citizens.”

But Claudia Mo, a pro-democracy lawmaker who has voiced support for the protest movement, said it was the city’s “most political” budget since the handover of the former British colony to China in 1997. While the pro-democracy camp is expected to largely support the handouts, she said: “If the government thought the $10,000 could earn back the public’s trust—in their dreams.”

Governments across the region have stepped up support for the economy to cushion the economic fallout from the epidemic. Singapore unveiled a $4.6 billion stimulus package and South Korea’s President Moon Jae-in has called for all possible measures to support the economy.


Mr. Chan said the impact of the epidemic on Hong Kong could be greater than that of the SARS outbreak in 2003 but added that “the economy of Hong Kong should be able to recover once the epidemic is over.”

Write to Joyu Wang at joyu.wang@wsj.com