Financial Secretary Paul Chan Mo-po (second from left) and other officials display copies of the 2024-25 Budge during a news conference at the government headquarters in Admiralty on Feb 28, 2024. (CALVIN NG / CHINA DAILY)
Hong Kong Financial Secretary Paul Chan Mo-po said on Wednesday that the city’s economy is set to grow this year by around 2.5 percent to 3.5 percent, while the outlook for 2025 to 2028 is an average expansion of 3.2 percent.
Chan announced the expected growth figures as he delivered the special administrative region’s 2024-25 Budget. Last year, the city’s economy grew 3.2 percent.
While Hong Kong’s economic development will be sustained and solid in the medium term, the SAR government will implement a comprehensive fiscal consolidation program to contain operating expenditure growth and increase revenue as the city has incurred four budget deficits over the past five financial years, Chan said.
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He added that Hong Kong’s anticipated economic growth would take place amid “the gradual revival in global demand, the anticipated progressive declines in interest rates in the United States and the eurozone, and the country’s focus on promoting high-quality development”.
Amid the subdued economic environment, the government revised its forecast consolidated deficit for the 2023-24 financial year to HK$101.6 billion ($13 billion), 86 percent higher than the figure forecast by Chan last February.
Meanwhile, the city’s fiscal reserves are expected to fall to HK$733.2 billion by the end of March, from HK$834.7 billion in the previous year.
For the 2024-25 financial year, the administration forecasts another budget deficit of HK$48.1 billion after taking account of bond issuance proceeds, and fiscal reserves will decrease to HK$685.1 billion by the end of March 2025. Total government expenditure and revenue for the year are estimated to be HK$776.9 billion and HK$633 billion, respectively.
“I welcome the budget’s fiscal consolidation program, which focuses on restoring fiscal balance while fully taking into account the financial constraints of the public and businesses,” said Chief Executive John Lee Ka-chiu.
Tan Yueheng, a member of the Legislative Council, said, “The budget strikes an appropriate balance between considering people’s livelihood expenditure and supporting development momentum, embodies the dual combination of proactive government and an efficient market, and also takes into consideration the long-term sustainability of public finance.”
Regarding the need to contain operating expenditure growth, the government will continue to maintain zero growth in the civil service establishment, and implement the Productivity Enhancement Program whereas 1 percent of the recurrent expenditure will be cut for two consecutive years, and reallocate resources to enhance existing services or introduce new services.
To boost revenues, the administration proposed implementing a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the 2024-25 assessment year. The first HK$5 million net income will continue to be subject to the 15 percent standard rate, and the portion exceeding HK$5 million will be taxed at 16 percent.
Other revenue-generating measures include implementing the progressive rating system for domestic properties, reviewing various fees and charges in a timely manner, and resuming a hotel accommodation tax at 3 percent.
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Federation of Hong Kong Industries Chairman Steve Chuang said that amid challenges such as the fiscal deficit, an uncertain external environment and high interest costs, Hong Kong should “adhere to the prudent public finance principle of living within our means, while continuing to invest in innovative technologies and new industries and support small and medium-sized enterprises, reflecting the government’s flexibility in financial management”.
With further budget deficits looming, the government’s fiscal consolidation program also included a much reduced sweetener package, with a total amount of about HK$11.5 billion, a decrease of approximately 80 percent from last year’s approximately HK$59.4 billion.
Chan added that while budget deficits in recent years have limited the government’s space in introducing relief measures, he understood the problems faced by some residents, so some of these measures will be maintained but on a reduced scale.
Another prominent measure in the budget is that, starting from Wednesday, property purchasers do not need to pay Special Stamp Duty, Buyer’s Stamp Duty or New Residential Stamp Duty when buying residential properties in Hong Kong.
The government will also issue HK$120 billion worth of bonds in 2024-25 to enhance financial inclusiveness and public participation in infrastructure and sustainable development.
