Hong Kong’s finance minister has adjusted his forecast for the fiscal deficit to below HK$100 billion, following earlier estimations that the budget shortfall would reach that figure for a third consecutive year.
Financial Secretary Paul Chan. File photo: Kyle Lam/HKFP.
The government will prioritise controlling increases in recurrent spending, on the condition that public services could at least be maintained, Secretary for Finance Paul Chan wrote in his blog on Sunday.
Chan also said the government was considering requesting departments to review resource allocation and priorities on top of an existing 1 per cent budget cut that will take effect in the 2025-26 fiscal year.
Public works review
The finance chief also said the government would review its priorities for public works projects based on their urgency and scale, with priority given to the Northern Metropolis development and other projects related to economic development and housing.
The Northern Metropolis is a 30,000-hectare housing and business hub in the city’s northern New Territories, along the city’s border with mainland China.
“We will also make good use of bond issuance and public-private partnerships to leverage market funding to promote the development of these infrastructural projects,” he said.
Chan said last month that the deficit was expected to reach HK$100 billion, up from the HK$48 billion forecast in his budget speech last February, citing a hobbled property market that had taken a toll on government revenue from land sales and stamp duties.
In Sunday’s blog, he did not offer a new deficit figure beyond saying that it would be “below” HK$100 billion.
Hong Kong last month also brought its economic growth forecast for the 2024-25 fiscal year down to 2.5 per cent, from the previous estimated range of 2.5 to 3.5 per cent.
Hong Kong has been trying to social housing problems for years. Photos taken in Tung Chung. Photo: Kyle Lam/HKFP.
Chan last month said that the government would rely on cutting costs to balance its books, while finding new revenue sources was “not a top priority.” If the finance chief’s latest forecast is accurate, it would end a two-year streak of the city logging a deficit in excess of HK$100 billion.
Chan on Sunday pointed to pandemic-related spending, the high interest rate environment, and geopolitical factors.
“With the overlapping and cumulative effects of these various factors, the consolidated deficit for the current 2024-25 financial year, after taking into account the proceeds from bond issuance, is expected to be below $100 billion,” Chan wrote.
Chan’s February budget factored in HK$120 billion in proceeds from issuing government bonds.
