When he sits down later this month to finalise the budget for
the coming financial year, Financial Secretary Paul Chan Mo-po will have some positive news in his pocket to balance against the many calls for additional spending. As some of those new demands are likely to be expensive and compelling, he will need all the help he can get.
First, the good news. Hong Kong is heading for a surplus in public finances. In his 2025 budget, Chan forecast a deficit on the consolidated operating account of HK$67 billion (US$8.6 billion).
In the first eight months of the financial year, the actual deficit on the consolidated operating account was only HK$18 billion. As the final four months are often when the bulk of tax revenues come in, we could be looking at a surplus of tens of billions of dollars on the operating account.
The better-than-expected results are attributed to the higher stamp duty revenues boosted by Hong Kong’s stellar performance as a fundraising centre, having reclaimed the top spot for money raised by way of initial public offerings. This must also have been a factor in the government’s recent announcement of an upgrade in forecast GDP growth, to 3.2 per cent from a range of 2–3 per cent.
The government is already moving ahead aggressively with the implementation of the Northern Metropolis project. As this requires a much more activist approach to economic development than the city has practised before, one consequence will be a greater call on public funds to provide basic infrastructure and even co-invest with the technology companies it hopes to attract. Once we have helped establish the core of the project and generated some momentum, it should become self-sustaining. But in the early stages, the administration will have to play a major role.