Hong Kong’s Financial Secretary Paul Chan struck a positive tone during his budget speech on Wednesday as he revealed measures to boost economic recovery after the Covid-19 pandemic, as well as incentives to help businesses and residents.

Chan said the city is at the early stages of recovery since the lifting of most of its stringent Covid measures late last year.

“I believe that Hong Kong’s economy will visibly recover this year, and I remain positive,” Chan said during his budget speech. “However, the economic recovery is still in its initial stage, and there is a need for our people and businesses to regain vigor.”

Hong Kong’s economy is expected to see a rebound of 3.5% to 5.5% in 2023, after shrinking 3.5% in 2022, Chan said.

In January, the global financial hub reopened its borders with mainland China, for the first time in three years.

Hong Kong closely followed China’s strict zero-Covid policy until the middle of 2022 when the city began to ease some of the restrictions. In December, the Asian financial center dropped nearly all of its Covid requirements.  

“Domestically, the outbreak of the fifth wave of the epidemic early last year and tightened financial conditions weighed heavily on domestic demand,” said Chan on Wednesday.

“Nevertheless, with the local epidemic situation stabilizing, and the government’s counter-cyclical measures and disbursement of consumption vouchers making key impacts, employment conditions improved continuously.”

As part of the budget incentives, Hong Kong will hand out consumer vouchers worth HK$5,000 ($637) per person to all adults this year. That’s half of what the government gave out in the previous budget in 2022 — or HK$10,000.

The financial secretary also announced measures to reduce salaries tax by 100%, capped at HK$6,000. This is lower than the cap set for the previous budget.

Some economists previously raised questions on the effectiveness of the handouts in boosting economic recovery.

Still, William Ma of Grow Investment Group, said these measures will certainly help lift domestic consumption.

“I think the HK$5,000 … is not [what] everyone expected coming in. And second plus the HK$6,000 tax cut — all this combined, I believe [will] create a good momentum for the domestic consumption recovery in [the first and second quarter],” Ma, told CNBC’s “Street Signs Asia” on Wednesday.

Hong Kong’s financial chief also revealed plans to submit a legislative proposal in the second half of this year, that will impose a minimum tax rate of 15% on multinational corporations with a global turnover of at least (nearly $800 million) from 2024-25.

With cost pressures expected to increase alongside economic recovery, Chan predicted that headline inflation in 2023 will be at 2.9%.

Still, he noted that in the medium to long term, Hong Kong’s economy will see “abundant opportunities.”

The government estimated that Hong Kong will see a budget deficit of HK$139.80 billion for the financial year 2022-2023. That’s more than its original expectation of about HK$56 billion.

Fiscal reserves will likely fall to HK$817.3 billion by the end of the financial year ending March 31, Chan said.

— CNBC’s Lim Hui Jie contributed to this report