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Budget Speech by the Financial Secretary (12)

Revised Estimates for 2012-13

150. When I prepared the 2012-13 Budget early last year, I made a prudent forecast for government revenue in view of the global economic downturn, sluggish export and local economic slowdown.  One year on, my forecast about the economic conditions has proved to be accurate.  However, our actual revenue from various items now exceeds the original estimate.  Despite the economic fluctuations last year, local enterprises showed strong resilience.  Revenue from earnings and profits tax is $24.8 billion higher than the original estimate.  With the Government stepping up land sale to increase land supply, revenue from land premium has also increased by $9.1 billion compared to the original estimate.  Given hectic trading in the property market in the first three quarters and a bullish stock market in the fourth quarter of this year, stamp duty revenue is $6 billion higher than the original estimate.  Moreover, the dividend from the West Rail Property Development Limited is about $10 billion higher than the original estimate.  Taking all these into account, the revised estimate for government revenue for 2012-13 is $445.5 billion, $55.2 billion higher than the original estimate.  As for government expenditure, I forecast a revised estimate of $380.6 billion, three per cent or $13.1 billion less than the original estimate.

151. For 2012-13, I forecast a surplus of about $64.9 billion.  By 31 March 2013, our fiscal reserves are expected to be $734 billion, equivalent to 36 per cent of GDP or 23 months of government expenditure.

Estimates for 2013-14

152. Operating expenditure for 2013-14 is estimated to be $352 billion and recurrent expenditure will be $291.3 billion, representing an increase of 15.5 per cent and 10.5 per cent respectively over the revised estimate for 2012-13.  It is estimated that capital expenditure will be $88 billion, including $70.1 billion on capital works.  I forecast that total government expenditure will reach $440 billion, an increase of 15.6 per cent compared with the revised estimate for 2012-13.  Public expenditure will be equivalent to 21.7 per cent of GDP.

153. The increases in expenditure, both total and recurrent, for 2013-14 far exceed the estimated nominal GDP growth of 5.5 per cent in 2013.  This clearly demonstrates that the current-term Government upholds the principle of committing resources as and when needed to provide appropriate services for the community.

154. Total government revenue for 2013-14 is estimated to be $435.1 billion.  Earnings and profits tax, estimated at $189.4 billion, will be our major source of revenue.  Land revenue is estimated at $69 billion.

155. Taking all these into account, it is expected that a small deficit of about $4.9 billion will be recorded in our accounts in the coming year, and we shall largely achieve fiscal balance.  Fiscal reserves are estimated at $729.1 billion by end-March 2014, representing approximately 34 per cent of GDP or equivalent to 20 months of government expenditure.

Medium Range Forecast

156. For the medium term, the annual average growth rate will be four per cent in real terms for the four-year period between 2014 and 2017, while the underlying inflation rate will average 3.5 per cent.  The Operating Account will see a surplus for the period between 2014-15 and 2017-18.  With expenditure on infrastructure projects ever increasing, a deficit will arise in the Capital Account for the whole period.  Fiscal reserves are estimated at $850.3 billion by end-March 2018, representing 31 per cent of GDP or 21 months of government expenditure.

(To be continued)

Ends/Wednesday, February 27, 2013
Issued at HKT 12:45


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