Hong Kong's government has delivered its financial forecast for the upcoming fiscal years, highlighting both economic challenges and strategic measures aimed at fiscal stability. During his annual budget speech at the Legislative Council on February 26, 2025, Financial Secretary Paul Chan Mo-po announced significant revisions to the revenue estimates, projecting total revenues for 2024-25 to reach HK$559.6 billion, which is 11.6% lower than previously anticipated. This adjustment is primarily attributed to decreased earnings from land premiums and stamp duties, which have impacted the overall fiscal picture.
The budget anticipates total government expenditures at HK$754.8 billion, creating an expected deficit of HK$87.2 billion for the fiscal year. Chan emphasized the importance of controlling spending, as fiscal reserves are projected to dwindle to HK$647.3 billion by March 31, 2025. Nonetheless, the government is optimistic about future revenues, forecasting increases for 2025-26 driven by rising earnings and profits tax, which they expect to reach HK$301.2 billion.
Tax measures proposed alongside the budget reveal the government's effort to balance financial prudence with support for residents. Salaries tax and profits tax reductions will be applied at 100%, but the cap has been halved from HK$3,000 to HK$1,500. This cap adjustment means 2.1 million taxpayers and 165,000 businesses will receive benefits, yet it will also decrease overall government revenue by HK$3.1 billion.
Chan noted, "To ease the burden on buyers of residential and non-residential properties, I announce..." new measures allowing for higher property values exempt from stamp duty hikes. The threshold for properties liable for the lower stamp duty will rise from HK$3 million to HK$4 million, expected to impact approximately 15% of property transactions. This change aims to alleviate pressures on property buyers, introducing some relief amid broader economic challenges.
Despite the projected deficit, future outlooks published during the budget reveal optimism. The government is committed to achieving balance within the operating account by 2025-26 and anticipates returning to surplus by 2026-27. Chan highlighted, "We will largely achieve balance" as Hong Kong's fiscal policies begin to stabilize.
Forecasts for the economy show slight growth, with real terms predicted to rise between 2% to 3% for the year 2025. Nonetheless, the external environment remains complex, marked by trade protectionism and geopolitical challenges, adding pressure to Hong Kong’s market. Chan stated, "Hong Kong is also making every effort to promote market diversification and open up new growth areas, and the economy is expected to grow steadily," reflecting the government’s resolve to navigate through uncertain times.
Looking toward the future, Chan foresees average annual growth rates of 2.9% from 2026 to 2029, with underlying inflation anticipated to hover around 2.5%. The government hopes to leverage market forces by issuing bonds as part of its strategy to handle the growing expenditure for infrastructure and development projects.
Overall, the latest budget announcement positions the city on the path toward expected improvement but requires careful navigation through both internal fiscal reforms and external market conditions. Moving forward, Hong Kong’s fiscal policies will play a pivotal role as the city strives to regain stability and economic vitality following years of challenges.