Hong Kong's 2025-26 Budget, released on February 26, 2025, has sparked significant discussion among analysts, businesses, and community organizations alike due to its projected deficit of HK$87.2 billion. Financial Secretary Paul Chan delivered the budget speech amid growing economic challenges, emphasizing the need for strategic investments aimed at stimulating growth and addressing the unique developmental needs of Hong Kong.
The budget places considerable emphasis on fostering innovation and enhancing the capabilities of small and medium enterprises (SMEs). Key initiatives include expanded tax incentives for family offices and the digital asset sector, aimed at attracting global investors. According to financial analysts like KPMG’s John Timpany, these measures are positioned to inject fresh vitality and open new growth avenues within the financial sector. “The focus on artificial intelligence not only aligns with global trends but solidifies Hong Kong's ambitions to emerge as a leading player within this transformative space,” Timpany remarked, stressing the importance of projects like the Hong Kong Artificial Intelligence Research and Development Institute.
Notably, the Hong Kong Productivity Council (HKPC) and the Hong Kong Trade Development Council (HKTDC) have expressed their unwavering support for the budget. HKPC Chairman Hon Sunny Tan praised the focus on technological investment, stating, “Technological innovation is key to economic growth.” He noted the HKPC's intention to align closely with government initiatives, particularly those aimed at advancing artificial intelligence, green technology, and life sciences.
On the other hand, HKTDC Chairman Dr. Peter K. N. Lam applauded initiatives like the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), along with the new “E-commerce Express” program. These initiatives are crafted to aid local businesses seeking to penetrate the Mainland Chinese market through enhanced digital platforms, allowing companies to leverage e-commerce effectively.
Not everyone, though, is pleased with the budget's proposals. The Society of Community Organization (SoCO), which advocates for the underprivileged, criticized the budget for what they termed inadequate support for low-income individuals and families. “The budget measures are merely extensions of existing policies and do not sufficiently address the dire needs of our most vulnerable residents,” the organization stated. Their discontent is heightened by the decision to scrap the HK$2,500 grant allocated to students, which has been instrumental for many from lower-income backgrounds.
SoCO argues for increased payments to the Comprehensive Social Security Assistance (CSSA) scheme—calling for at least one month's worth of support—and adequate funding for elderly services. Their concerns reflect broader societal challenges amid rising living costs and stagnant wages, especially as Hong Kong continues to grapple with the repercussions of its enduring property crisis.
Despite the critiques, Chan remains steadfast about the budget's objectives. He advocates for investing aggressively in megaprojects, such as the Northern Metropolis initiative, which is expected to cost around HK$120 billion over the next five years. “If this is the time for Hong Kong's future development, it’s inappropriate not to invest,” Chan stated, justifying the forecasted capital account deficit as supportive of long-term infrastructure development.
Importantly, the budget outlines various infrastructure projects, which are anticipated to create numerous job opportunities and stimulate economic activity. Chan has highlighted the need to reduce reliance on land sales, citing the necessity of transitioning to diverse income sources such as profits tax and salaries tax. Amid plummeting land sale revenues, adopting fiscal discipline will help maintain the support needed for public services.
Analysts from PwC and KPMG support this narrative, emphasizing not only the importance of enhancing Hong Kong’s attractiveness as a financial hub but also the need for innovation across all sectors to mitigate long-term risks. “Maintaining fiscal discipline coupled with progressive investments will be key for Hong Kong to recover and thrive amid global uncertainties,” argues Agnes Wong from PwC.
Through its comprehensive approach, the 2025-26 Budget seeks to navigate fiscal challenges by implementing measures beneficial for both the economy and the populace. With the focus clearly placed on innovation and responsiveness to various sectors, this budget could set the stage for Hong Kong’s continued evolution as it strives to retain its competitive edge on the global stage.