Chan’s over two-hour long speech outlining the budget for the 2023-2024 fiscal year failed to address expectations about how the government will help execute Chief Executive John Lee’s vision of encouraging foreign talent to come to the city.

Instead, Chan focused on stimulating domestic demand, including a surprise decision to issue more cash vouchers to eligible residents — a divergence from other major economies that have shifted away from handouts with the end of the pandemic.

“The city has lost its appeal with foreign investors over Covid restrictions and the national security law,” said Lloyd Chan, senior economist at Oxford Economics Ltd., referring to Hong Kong’s pandemic policies and a Beijing-led crackdown on local dissent. When it comes to attracting talent, he added, “the budget is disappointing on this front.”

The finance chief hasn’t had it easy. Hong Kong’s fiscal deficit ballooned during its isolation from the world and the economy shrank in three of the last four years. The budget shortfall for the 2022-2023 fiscal year hit a whopping HK$140 billion (US$17.8 billion), Chan said Wednesday, about three times higher than his original estimate.

That meant his latest budget proposal not only needed to please an audience looking for a quick economic recovery, but also provide clear measures on how Hong Kong can avoid being overtaken by Singapore as Asia’s top destination for business, talent and capital.

“The fiscal position has really deteriorated over the past two years,” said Chan of Oxford Economics. “The budget is striking a balance between charting a course for a stronger recovery and proper investment in fiscal areas, while taking being mindful of its fiscal position.”

Yet several proposals suggested by economists or other experts — such as exempting “strategic” employees from paying salary taxes or making the city a more attractive location for secondary listings by reducing the stamp duty rate for transferring Hong Kong stock — were not part of the budget.

Investors showed little enthusiasm following the budget address. The Hang Seng Index closed down 0.5 percent to a seven-week low.

The return of consumption vouchers wasn’t expected by most economists surveyed by Bloomberg, who thought instead the city would end the program after doling out HK$10,000 cash vouchers last year.

This year’s handout was reduced by half to HK$5,000, a sign the financial secretary was wary of allowing stimulus to drive up the deficit too much. Even so, some experts struggled to make sense of the move, given the city’s borders have reopened and social distancing curbs have been removed.

“More vouchers at a time of a large increase in retail sales from visitors can be counterproductive,” said Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis SA. “It can only fuel inflation.”

She suggested officials should instead spend the money on building a social safety net to protect the city’s elderly, or take other steps to not only attract talent, but keep it.

Other stimulus announced on Wednesday was modest in size. Chan said the city would reduce the cap on its salaries tax rebate to HK$6,000 from HK$10,000, as he stressed the need to adopt a “moderately liberal fiscal stance” to spur growth.

A proposal to lower the tax rate for first-time buyers of properties worth HK$9 million (US$1.1 million) or less was also met with a lukewarm response from investors. Property stocks ended the day flat.

“Nothing groundbreaking has been announced,” Garcia-Herrero said. She said the stamp duty reduction was the “most positive” step but added that it was “clearly not enough.”

The stimulus measures in total will result in a deficit, Chan said, estimating the gap to be HK$54.4 billion for the 2023-2024 fiscal year.

That should still be manageable, given the city has enough in reserve to cover itself from any shortfall for now. It’s a prolonged drop in reserves that would put future government spending at risk.

Chan made it clear his goal was to spread some cheer through a city that’s endured a lot in recent years, saying in his concluding remarks it was his idea to come up a ‘Happy Hong Kong’ campaign. He forecast growth this year of as much as 5.5 percent and said the city should be able to expand an average of 3.7 percent each year through 2027.

Economists, though, are looking for what can sustain the city’s growth past the sugar high of cash giveaways and street parties.

“Anyone who looks at Hong Kong’s finances and the massive wall of contingent liabilities due to aging knows that taxes can only increase in the future,” Garcia-Herrero said. “It would be important to build other advantages beyond the tax haven story.”