Medium Range Forecast
256. The 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 reinforced fiscal consolidation programme. For 2025‑26, a real economic growth rate of two to three per cent is adopted, and that for 2026‑27 to 2029‑30 is about 2.9 per cent per annum.
257. During the above period, the average annual capital works expenditure will be about $120 billion, while recurrent government expenditure will grow at a rate of 3.5 per cent per annum. The ratio of total government expenditure to GDP will gradually fall from about 24.4 per cent for 2025‑26 to about 20.9 per cent for 2029‑30.
258. Regarding revenue from land premium, the forecast is made at a conservative level. For 2026‑27 and onwards, it is assumed to be progressively rising to two per cent of GDP, which is lower than the 20-year average ratio of 3.3 per cent. 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 maintain at about 20 per cent starting from 2025‑26.
259. In addition, the MRF reflects the proceeds from the annual issuance of government sustainable bonds and infrastructure bonds worth about $150 billion to $195 billion in total.
260. Based on the above assumptions and arrangements, the deficits in the Operating Account and Capital Account in the next five years will gradually reduce every year. The Operating Account is estimated to return to a surplus from 2026-27 onwards, while the deficit in the Capital Account will fall progressively from $159.8 billion in 2025‑26 to $87.6 billion in 2029‑30. After taking account of net proceeds from the issuance of bonds, the Consolidated Account will return to a surplus starting from 2028-29. The above forecast has not taken into account any tax concessions or relief measures that the Government may implement after 2025‑26.
261. Fiscal reserves are estimated at $579.1 billion by the end of March 2030, representing 13.9 per cent of GDP, or equivalent to about eight months of government expenditure.
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