Budget surplus of HK$70b forecast

PUBLISHED : Wednesday, 15 December, 2010, 12:00am
UPDATED : Wednesday, 15 December, 2010, 12:00am

The government is likely to record a budget surplus of about HK$70 billion this financial year, according to consensus estimates by leading accounting firms.

Hong Kong's reserves may balloon to a record of almost HK$600 billion - after officials had forecast a HK$25.5 billion deficit.

The expected surplus has put the government in a more comfortable position to cope with the uncertain economic environment, especially in Europe and the United States.

At a projected HK$582.4 billion to HK$590.4 billion, the reserves would be equal to 33.5 per cent to 33.9 per cent of the city's estimated gross domestic product this year, according to forecasts by accounting firm Ernst & Young.

If International Monetary Fund recommendations that Hong Kong's reserves be set at 30 per cent to 50 per cent of GDP are followed, the government could have at least HK$50 billion to use, said Agnes Chan Sui-kuen of Ernst & Young.

'If our budget estimates are correct, then there is an extra 3 per cent of GDP that can be used before our fiscal reserves fall below the IMF's minimum. But we are suggesting the government spend 1 per cent of GDP on various measures now as a sort of pilot scheme to see how effectively the funds are used. Then, if more is needed, we can better spend the money,' Chan said.

Estimates have also been made by accounting firms such as Deloitte and KPMG.

In a pre-budget consultation meeting with Financial Secretary John Tsang Chun-wah, the Democratic Alliance for the Betterment and Progress of Hong Kong tabled a spending proposal which involved about HK$70 billion.

It included a HK$30 billion fund to subsidise public transport companies to help stabilise the pressure of fare increases. The party also proposed helping businesses promote their brand names on the mainland.

In a separate meeting, the group Economic Synergy called on the government to spend HK$10 billion to fight inflation and relieve people's financial burden, including waiving government rates for six months.