Budget Speech

Medium Range Forecast

191. The MRF projects, mainly from a macro perspective, the revenue and expenditure as well as financial position of the Government.  From 2022-23 to 2025-26, a real economic growth rate of 3.3 per cent is adopted for the MRF.

192. During the above period, the average annual capital works expenditure will exceed $100 billion, while the growth of recurrent government expenditure ranges between 3.5 per cent and 4.7 per cent per annum.

193. Regarding revenue from land premium, the forecast from 2022-23 onwards is based on the average proportion of revenue from land premium to GDP over the past 15 years, which is 3.6 per cent of GDP.  I also assume that the growth rate of revenue from profits tax and other taxes will correspond to the economic growth rate in the next few years.

194. In addition, the MRF reflects the bringing back of the Housing Reserve and the investment return of the Future Fund, and the proceeds of the Government Green Bond Programme.

195. Based on the above assumptions and arrangements, I forecast an annual deficit in the Operating Account in each of the coming five financial years, as well as a deficit in the Capital Account from 2022-23 to 2024-25.  The estimated deficit in the Operating Account in 2021-22 is mainly due to the expenditure arising from the one-off relief measures announced in this Budget and some of the relief measures announced last year.  The forecast deficit in the Operating Account in the following four years is attributed to the fact that recurrent expenditure will be higher than revenue receipts.  The above forecast has not taken into account any tax rebate or relief measure that the Government may implement over these four years. 

196. Fiscal reserves are estimated at $775.8 billion by the end of March 2026, representing 22 per cent of GDP, or equivalent to 12 months of government expenditure.