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Budget Speech
Medium Range Forecast
128. I now give a brief account of the 2009-10 estimates. I have adopted a counter-cyclical fiscal strategy and set total government spending at $301.6 billion. While operating expenditure for 2009-10 will be slightly lower than that for 2008-09 as the latter includes the costs of a number of one-off measures, it is higher than actual expenditure in 2007-08 by 19.2 per cent. In comparison, the GDP for 2009 is forecast to increase by only
1.8 per cent over 2007. I forecast a deficit of $9.8 billion in the Operating Account and a deficit of $30.1 billion in the Capital Financing Statement. This results in a deficit of $39.9 billion in the Consolidated Account, equivalent to 2.4 per cent of our GDP. Fiscal reserves are estimated at $448.1 billion by end March 2010, equivalent to 18 months of government expenditure.
129. For the medium term, I estimate that the annual average growth rate will be 3.5 per cent in real terms for the period 2010-13, while the inflation rate forecast will average two per cent. I forecast a deficit in the Operating Account for the next three years, and followed by a return to surplus in our Operating Account in 2012-13, with a further increase in surplus in the subsequent year.
130. As regards capital revenue and spending, I will continue to invest heavily in infrastructure so as to counter the financial crisis, create employment and enhance the long-term competitiveness of Hong Kong. With the major infrastructure projects entering their construction peaks and an expected decrease in land revenue, I forecast a capital financing deficit for some time in the future. Our annual capital works expenditure will be at a very high level over the next few years, and may reach $50 billion. This will pose challenges to the construction industry. We will pay close attention to the construction industry's capacity to avoid bunching of projects causing tension in the supply of construction workers and cost fluctuations.
131. In this time of economic turbulence, the preparation of this year's Budget has been a great challenge. Following the principles of prudent financial management and keeping expenditure within the limits of revenues as stipulated in Article 107 of the Basic Law, I have prepared a Budget that is in the best interests of the public. In light of the current economic environment and needs of the community, I hold to the view that expenditure for next year should be maintained at a high level despite a fall in revenue. Although this will lead to a deficit in 2009-10, requiring us to draw on the fiscal reserves, I consider it appropriate. The Government should show its commitments to the community during exceptional times. In the medium term, with the recovery of the economy and our control of operating expenditure, I forecast that the consolidated deficit
will gradually decline and we will largely achieve fiscal balance by 2013-14. I estimate that the fiscal reserves will be about $390 billion by end March 2014, equivalent to 14 months of government expenditure.
|
2009–10
($ billion) |
2010-11
($ billion) |
2011-12
($ billion) |
2012-13
($ billion)
|
2013-14
($ billion) |
Operating revenue
|
234.2 |
235.3 |
253.7
|
273.5
|
290.0
|
Operating expenditure
|
244.0
|
249.4
|
258.1
|
267.1
|
276.4
|
Operating surplus/(deficit) |
(9.8)
|
(14.1) |
(4.4)
|
6.4 |
13.6 |
Capital revenue |
27.5
|
44.3
|
52.1
|
53.7
|
56.3
|
Capital spending (including payments from the Capital Investment Fund)
|
54.1
|
55.2 |
69.6
|
68.9
|
71.2 |
Repayment of government bonds and notes |
3.5
|
—
|
—
|
—
|
—
|
Capital financing deficit
|
(30.1)
|
(10.9)
|
(17.5)
|
(15.2)
|
(14.9)
|
Consolidated deficit |
(39.9)
|
(25.0)
|
(21.9)
|
(8.8)
|
(1.3)
|
- as a percentage of GDP |
2.4% |
1.5%
|
1.2%
|
0.5%
|
0.1%
|
Fiscal reserves |
448.1
|
423.1
|
401.2
|
392.4
|
391.1
|
- as number of months of government expenditure
|
18
|
17
|
15
|
14
|
14
|
- as a percentage of GDP |
27.2% |
24.6%
|
22.3%
|
20.9%
|
19.9%
|
Public expenditure
|
319.4
|
326.8
|
350.0
|
358.7
|
370.9
|
- as a percentage of GDP |
19.4%
|
19.0%
|
19.5%
|
19.1%
|
18.9%
|
|
|
|