Medium Range Forecast
213. We are determined and confident in overcoming the challenges currently facing our public finances. The fundamental principle that we follow is to maintain the sustainability of public finances. We have formulated a fiscal consolidation programme to achieve fiscal balance gradually and maintain fiscal reserves at a prudent level for ensuring the provision of various services to the society and promotion of economic development while also having sufficient buffer to roll out measures for rendering assistance to the public and enterprises at times of adversity or in other emergency situations.
214. The Medium Range Forecast (MRF) projects, mainly from a macro perspective, the revenue and expenditure as well as financial position of the Government. It has fully reflected the impact of the measures under the fiscal consolidation programme. For 2024‑25, a real economic growth rate of 2.5 to 3.5 per cent per annum is adopted. From 2025‑26 to 2028‑29, a real economic growth rate of about 3.2 per cent per annum is adopted.
215. During the above period, the average annual capital works expenditure will be about $90 billion, while recurrent government expenditure will grow at a rate of 4.2 per cent per annum. The ratio of total government expenditure to GDP will gradually fall from about 24.6 per cent for 2024‑25 to about 20.6 per cent for 2028‑29.
216. Regarding revenue from land premium, the forecast for 2025‑26 and onwards is mainly based on the more conservative 20‑year average ratio of revenue from land premium to GDP, which is 3.4 per cent of GDP. I also assume that the growth rates of revenue from profits tax and other taxes will correspond to the economic growth rates in the next few years. Overall, the ratio of government revenue to GDP will gradually increase from about 20 per cent for 2024‑25 to about 22.6 per cent for 2028‑29.
217. In addition, the MRF reflects the proceeds from the annual issuance of government green/sustainable bonds and infrastructure bonds worth approximately $95 billion to $135 billion in total.
218. Based on the above assumptions and arrangements, the deficit in the Operating Account and Capital Account in the next five years will gradually reduce every year. The Operating Account is estimated to record a surplus two years later from 2026‑27 onwards, while the Capital Account will record surplus in 2028‑29. After taking account of proceeds from the issuance of bonds, the Consolidated Account will only record a deficit in 2024‑25 and will turn to a surplus in subsequent years. The above forecast has not taken into account any tax rebates or relief measures that the Government may implement over the coming four years.
219. Fiscal reserves are estimated at $832.2 billion by the end of March 2029, representing 21.2 per cent of GDP, or equivalent to approximately 12 months of government expenditure.
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