The Hong Kong government unveiled its Budget 2025 on February 26, 2025, with Financial Secretary Paul Chan highlighting several key measures to address social welfare, stimulate the economy, and manage the city's financial deficits. The budget is particularly significant as it aims to tackle the fiscal challenges posed by consecutive years of large deficits, estimated to be over HK$100 billion. With the budget cover illustrated in teal, symbolizing potential renewal and optimism, Chan stressed the importance of fiscal responsibility amid calls for increased public services and support.
One of the main focuses of the budget is the projection of government expenditure, which is expected to rise by 8.9%, reaching approximately HK$822.3 billion for the 2025-2026 fiscal year. This increase encompasses HK$8.1 billion designated for operational spending and HK$14.1 billion for non-operational spending. An emphasis on strict budget management has led to the introduction of what Chan termed the “enhanced fiscal consolidation plan,” which is expected to cumulatively reduce government recurrent expenses by 7% by the 2027-2028 fiscal year.
Among the budget's notable fiscal measures, the government is set to extend tax reductions across various sectors. For individual taxpayers, the budget proposes raising the maximum tax rebate for salary and income tax to HK$1,500, benefitting around 2.14 million taxpayers. Land and property owners will also see relief, with the government announcing reductions in property taxes with up to HK$500 off the rates applicable to both residential and non-residential properties. This initiative is likely to affect over 312,000 and 43,000 properties, respectively.
Transportation rebates are also undergoing modifications; the popular HK$2 public transport discount will be adjusted to reflect current economic realities. From now on, riders will be limited to 240 rides monthly, and if the fare exceeds HK$10, the discount will only apply as 20% of the total fare. While some residents may regard these limitations as unfavorable, others recognize the necessity of adapting public transport subsidies to maintain fiscal sustainability.
Simultaneously, the budget introduces measures aimed at bolstering public housing supply and fostering development within the Northern Metropolis, which includes areas like the Heung Yuen Wai boundary control point and the Lok Ma Chau Loop. The government plans to allocate around 90 hectares of land for educational infrastructure, which will include the establishment of the third medical school, as part of its strategy to expand higher education facilities and cater to Hong Kong's growing population.
“We face significant challenges, but we must balance these financial constraints with the needs of our citizens,” Chan noted as he addressed the criticisms facing the government over its spending priorities. He emphasized the importance of ensuring sufficient housing and infrastructure development for Hong Kong's residents as the city pushes forward with modernization efforts.
The government also announced plans to bolster innovation and technology initiatives. A notable investment of HK$1 billion will go toward establishing an Artificial Intelligence Research Institute aimed at fostering AI research and applications. This initiative aligns with Hong Kong's broader ambitions to become a hub for technological advancements. To support innovation, the government plans to launch seed funding programs and support schemes to help over 400 enterprises upgrade their production lines by implementing smart technologies.
Healthcare funding remains another focal point, with the government allocating resources for the establishment of new medical institutions and increased training slots for medical students, rising to 650 for the coming academic year. The anticipated growth aims to alleviate the pressure on the public healthcare system and address the increasing demand for medical services.
Despite the budget's ambitious outlook, it also hints at public service constraints as it introduces salary freezes for civil servants, including all levels of government personnel and legislators. The forecast estimates approximately 10,000 civil service roles will be cut by the end of this government term, sparking debates about the impacts on public welfare services.
“Harsh decisions are necessary for the long-term stability of our public finances,” Chan added, underscoring the government’s resolve to maneuver through fiscal challenges without compromising economic and social development.
Public reaction remains mixed; some praise the infrastructural investments and long-term vision, expressing optimism about the city's potential for recovery and growth, particularly through technology. Others, meanwhile, voice concerns over reduced subsidies and how the adjustments might affect vulnerable communities dependent on welfare initiatives.
Looking forward, the Hong Kong government is set to review the economic outlook, aiming for moderate growth of about 2% to 3% this year, with inflation rates expected to circle around 1.5% to 2% overall. With these financial forecasts, Budget 2025 reflects Hong Kong's stringent approach to reclaiming fiscal health, striving to service its diverse population amid unprecedented challenges faced by modern economies.