‘Steady as she goes’ as Hong Kong bids farewell to deficits

Hong Kong's Financial Secretary Paul Chan delivered a budget speech on Wednesday, announcing an updated economic growth forecast for the year, projecting an increase between 2.5 percent and 3.5 percent. This optimistic outlook is attributed to diversifying growth strategies and a focus on boosting innovation. Chan also stated that the city would end its deficits ahead of schedule, with an expected consolidated surplus of HK$2.9 billion for the financial year ending next month, a significant improvement from previous years marked by deficits. The budget revealed an operating surplus of HK$51.3 billion for the upcoming financial year, following three years of deficits. This improved fiscal position has been driven by a boom in the stock market, which has led to calls for additional financial incentives in the budget. However, Chan aimed to manage public expectations regarding potential sweeteners in the financial blueprint. The budget is characterized by substantial initiatives that will be funded through the available surplus. Additionally, Chan indicated that Hong Kong does not plan to receive any transfers from its Exchange Fund in the next five years. This statement followed concerns about the city’s financial stability after the announcement of a withdrawal of HK$150 billion (US$19.2 billion) from the government’s main investment arm, which is also regarded as a de facto sovereign wealth fund.