Hong Kong deficit balloons to HK$164.1 billion for first 8 months of financial year
- Government reveals financial figures for April to November period, with expenditure reaching HK$472.3 billion and revenue at HK$241.6 billion
- Economist Andy Kwan calls deficit alarming
Hong Kong’s deficit has ballooned to HK$164.1 billion in the first eight months of the financial year, far worse than the government’s full-year estimate of HK$100 billion, with an economist describing it as alarming.
The government on Friday announced its financial performance between April and November, with expenditure reaching HK$472.3 billion and revenue at HK$241.6 billion.
The deficit during the period grew to HK$230.7 billion excluding HK$66.6 billion in green bonds the government sold earlier. Taking into account the green bonds, the deficit stood at HK$164.1 billion.
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“[T]he cumulative year-to-date deficit for the period was mainly due to the fact that some major types of revenue including salaries and profits taxes are mostly received towards the end of a financial year,” the government said.
The city’s reserves stood at HK$670.7 billion as of last month.
In the budget in February, the government forecast a HK$57 billion deficit for the financial year ending March 31, 2024. But Financial Secretary Paul Chan Mo-po earlier this month said the deficit was expected to be just over HK$100 billion.
Hong Kong has recorded a deficit every financial year since 2019 other than in 2021-22.
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Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, said revenue from the sale of green bonds helped offset the deficit, but the government would have to pay back the money and interest to bondholders upon maturity.
He described the HK$164.1 billion deficit as alarming.
“The government will receive a great deal of money in December and January as companies pay their profit tax and residents have to pay provisional tax,” Kwan said.
“But in March [at the end of the financial year], the government normally spends more than it gets.”
Excluding green bond revenue, Kwan said he expected the deficit could reach up to HK$190 billion given the economy had not picked up as much as earlier predicted.
He noted many residents also travelled to mainland China or overseas for breaks, which could impede Hong Kong’s economic growth and lower government income.
But Professor Terence Chong Tai-leung, executive director of Chinese University’s Lau Chor Tak Institute of Global Economics and Finance, said the deficit could still come in at around HK$100 billion if the government could secure land sales in the coming quarter.
“The fluctuations will come from land sales as other sources of revenue are quite stable,” Chong said.
“If we have more than HK$20 billion in land sales, then the whole-year deficit will be less than HK$100 billion.”
In the current financial year, the government has sold three residential sites and received a land premium of HK$7.27 billion. However, it has withdrawn another two residential tenders.
The economists noted that the government could have its profit tax and salaries tax secured as Hong Kong recorded economic growth in the first three quarters of this year, a much better performance than the 3.5 per cent shrink in 2022.
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Chong also noted retail sales in the first 10 months of the year grew 17.2 per cent compared with the same period in 2022, while the financial sector was still making a profit.
He also said that despite the property and stock market downturn, transaction volumes were similar to last year so the government could secure income from stamp duty.
Accounting firm PwC recently forecast a HK$110 billion deficit for the 2023-24 year based on its estimates of HK$651 billion in government revenue and expenditure of HK$761 billion.
It estimated land sales revenue could only reach HK$37 billion, 56 per cent lower than the initial official forecast of HK$85 billion.
