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Budget Speech by the Financial Secretary (1) (with photos/video)
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     Following is the full text of the Speech on the 2026-27 Budget delivered by the Financial Secretary, Mr Paul Chan, to the Legislative Council today (February 25):

President, Honourable Members and fellow citizens,

     I move that the Appropriation Bill 2026 be read a second time.

Introduction

2. Today is the ninth day of the Chinese New Year, and the city is still brimming with festive spirits. The bustling New Year fairs, the buzzing Night Parade and the dazzling fireworks display above Victoria Harbour have echoed the vigour and vitality symbolised by the Year of the Horse.

3. Over the past year, as a result of the booming economy and capital market, our tax revenue has increased. Coupled with the reinforced fiscal consolidation programme gradually bearing fruit, our public finances have improved sooner than expected. The Operating Account has returned to a surplus this financial year. After taking into account the proceeds from bond issuance, the Consolidated Account has also returned to balance ahead of schedule. All these have enabled us to suitably reinforce support for the people and small and medium enterprises (SMEs) within our means.

4. This year marks the beginning of the National 15th Five Year Plan. The stable and high-quality development of our country is always our strongest backing. Our country's sustained high-standard two-way opening-up, coupled with scientific and technological innovation, have presented us with new opportunities. We must embrace the 15th Five-Year Plan with an innovative mindset, fostering new quality productive forces in accordance with local conditions. Leveraging our edge of having close connectivity with the Mainland and the world, and with a large pool of talents, we will facilitate enterprises in opening up new markets. We expect Hong Kong's economy to sustain good momentum this year.

5. The theme of this Budget is: "Driving High-quality, Inclusive Growth with Innovation and Finance". I will elaborate on this a little later.

Economic Situation in 2025

6. The global political and economic landscape is fraught with complication and volatility. The United States (US) waged a tariff war early last year, precipitating a sharp escalation in global trade tensions. As the US reached preliminary trade agreements with various economies and achieved consensus with China on key economic and trade matters, trade frictions eased, allowing the global economy to continue expanding.

7. Technological transformation and the rapid development of artificial intelligence (AI) have spurred a fresh wave of investment enthusiasm and driven product demand. Asia, especially China, serves as an important engine propelling global economic growth. Furthermore, the resumption of interest rate cuts by the US since September last year has bolstered performance of the investment and capital markets. The International Monetary Fund (IMF) projects global economic growth of 3.3 per cent for 2025, which is broadly in line with that of 2024.

8. Hong Kong's economy was buoyant last year. External trade remained strong, private consumption rebounded, and fixed investment accelerated. The overall economy grew by 3.5 per cent in the year, marking the third consecutive year of expansion.

9. Boosted by robust demand for electronic-related products, total exports of goods from Hong Kong grew by 12 per cent in real terms, with particularly notable increases in exports to the Chinese Mainland and the Association of Southeast Asian Nations (ASEAN).

10. Exports of services rose by 6.3 per cent. Visitor arrivals surged by 12 per cent, while cross-boundary financial services and traffic saw sustained growth.

11. On domestic demand, private consumption expenditure rose by 1.7 per cent for the year, reversing the downward trend from the second quarter of 2025. Amid continuing economic expansion and a recovering residential property market, growth in overall investment expenditure accelerated to 4.3 per cent.

12. The labour market gradually stabilised in the latter half of the year. The seasonally adjusted unemployment rate stood at 3.8 per cent in the fourth quarter. Employment earnings showed sustained growth, with the median monthly employment earnings of full time employees increasing by 4.2 per cent year-on-year in the fourth quarter.

13. Inflation remained mild. Netting out the effects of the Government's one-off measures, the underlying inflation rate was 1.1 per cent last year.

14. The stock market delivered a stellar performance. The Hang Seng Index rose by 28 per cent over the year. The daily turnover surged by 90 per cent to a historic high of close to $250 billion. Capital raised through initial public offerings (IPOs) exceeded 2024 by more than two times to over $280 billion, ranking first globally.

15. The residential property market saw increases in both prices and transaction volumes. Market activities have been active since last March, with total transactions reaching a four year high of nearly 63 000 for the year. Property prices rose by 3.3 per cent for the year, ending a three-year decline, while rental prices rose by 4.3 per cent in the year. Transaction volume for non-residential properties rebounded, while the declines in rentals and prices narrowed.

Economic Outlook for 2026 and the Medium Term

16. Entering 2026, global trade tensions have moderated, and economic activities continued to expand in major economies. The Chinese Mainland will be the leading contributor to global economic growth, serving as the key driver for both regional and global economic momentum. The steadfast development of our country will continue providing firm support for Hong Kong.

17. Our country will implement more proactive macro policies this year, expanding domestic demand, and steadfastly advancing high-quality development, while maintaining reasonable economic growth. This will lay a strong foundation for the 15th Five Year Plan period, and generate propitious conditions for Hong Kong's economic growth.

18. Driven by investments in AI and other new technologies, the demand for related products continues to underpin the trade expansion in Asia. Market expectations of further interest rate cuts in the US would bolster investor confidence. The IMF forecasts moderate growth for the global economy this year.

19. Benefitting from these factors, Hong Kong's exports of goods should sustain decent growth. Exports of services will also continue to increase, driven by increasing visitor arrivals and demand for financial services.

20. Domestic demand will grow steadily. A stable labour market and rising household incomes will drive private consumption, while improvement in business sentiment, coupled with expectations of interest rate cuts, will boost asset markets and investments.

21. Nevertheless, the international environment remains complex and intricate. With the major advanced economies still frequently shifting their trade and economic policies, uncertainties will continue to loom over global trade. A slower-than-expected pace of US rate cuts could hamper the optimism currently underpinning the global financial market.

22. Based on our assessment of the current global and local economic situations, we forecast that Hong Kong's economy will grow by 2.5 per cent to 3.5 per cent this year.

23. As for prices, external price pressures are in check. With the local economy continuing to expand, inflation this year is expected to be moderately higher than last year. We forecast the underlying inflation rate and the headline inflation rate this year to be 1.7 per cent and 1.8 per cent respectively.

24. In the medium term, protectionism will persist in some major economies, while fragmentation of the global economy will continue. Nevertheless, the rise of the "Global South" and the reshaping of the global trade and investment landscape will unlock new markets and new growth areas for Hong Kong.

25. This year marks the beginning of the 15th Five-Year Plan. Hong Kong will proactively align with the 15th Five-Year Plan, better integrate and serve the overall national development, and continue to proactively participate in development of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).

26. The current-term Government is committed to expanding economic capacity and enhancing competitiveness, expediting the development of the Northern Metropolis (NM), driving growth through talents and innovation and technology (I&T) and developing new quality productive forces tailored to local circumstances for promoting high-quality economic development.

27. We forecast that Hong Kong's economy will grow on average by three per cent per annum in real terms from 2027 to 2030, with the underlying inflation rate averaging two per cent a year.

(To be continued.)
 
Ends/Wednesday, February 25, 2026
Issued at HKT 11:11
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