Budget Speech

Medium Range Forecast

202. The MRF projects, mainly from a macro perspective, the revenue and expenditure as well as financial position of the Government.  For 2023‑24, the real economic growth rate between 3.5 per cent and 5.5 per cent is adopted, and that for 2024-25 to 2027-28 is 3.7 per cent per annum.

203. During the above period, the average annual capital works expenditure will exceed $100 billion, while the recurrent government expenditure will grow at a rate between 3.3 per cent and 5 per cent per annum.  The ratio of total government expenditure to GDP will gradually fall from about 25 per cent for 2023-24 to about 22 per cent.

204. Regarding revenue from land premium, the forecast for 2024‑25 and onwards is mainly based on the 15-year average ratio of revenue from land premium to GDP, which is 3.7 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.  Overall, the ratio of government revenue to GDP will gradually increase from about 21 per cent for 2023-24 to over 23 per cent.

205. In addition, the MRF reflects the proceeds from the annual issuance of government green bonds and infrastructure bonds worth approximately $65 billion in total.  I will explain the details a little later.

206. Based on the above assumptions and arrangements, after taking into account proceeds from issuance of bonds and repayments, with the exception of a forecast deficit in 2023‑24, the Consolidated Account will turn to a surplus in the coming four years.  There will also be a deficit in the Capital Account from 2023‑24 to 2026‑27, which will turn to a surplus in 2027‑28.  As Hong Kong is susceptible to the influence of external political and economic environments given its fully open and externally‑oriented economy, government revenues fluctuate rather substantially.  The Operating Account is therefore estimated to record a deficit in 2023‑24 and 2024‑25, which will turn to a surplus in the subsequent years.  The above forecast has not taken into account any tax rebate or relief measure that the Government may implement over the coming four years.

207. Fiscal reserves are estimated at $983.7 billion by the end of March 2028, representing 25.6 per cent of GDP, or equivalent to approximately 14 months of government expenditure.

 

 

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