Thanks to a few one-off lucky breaks, the budget deficit will come in a lot lower than officially predicted, the financial secretary said.
The deficit, which has been steadily mounting because of the government's high fixed costs and shrinking revenue, would be $49 billion when the financial year finished at the end of the month, Henry Tang Ying-yen said.
That is 37 per cent less than the $78 billion estimate made by Mr Tang in October, when he added an extra $10 billion to the original estimate.
As it turned out, the Exchange Fund contributed $13.7 billion more than expected because of higher-than-anticipated returns on its assets, while better business conditions meant the government earned $5.7 billion extra in profits tax. Land income was also twice the expected figure, while government spending fell $10.7 billion.
But the outlook for the years to come is a bit rocky, with the deficit in 2004-05 forecast to hit $62.1 billion, although a proposed government bond issue of $20 billion may knock a corresponding amount off. The deficit will not go away until 2008-09, when Mr Tang expects a consolidated surplus of $7 billion. But there will still be an operating deficit of $5.2 billion.
Mr Tang forecast that economic growth over the next five years - the so-called medium term - will average about 3.8 per cent. After growing 6 per cent this year, the economy will expand 3.3 per cent in each of the next four years.
But estimates for revenue over that period seem to be pretty much unchanged from the estimates in last year's budget, when medium-term economic growth was forecast at 3 per cent.