Maintaining Fiscal Discipline
84. The financial
position of the Government has gradually improved with
the steady economic upturn.
As I mentioned earlier, the 2004?5 forecast
outturn shows that the operating deficit will be lower
than expected. If
our economy continues to pick up, we expect to achieve,
ahead of schedule, most of the fiscal targets set in
last year's Budget.
The three targets are:
operating expenditure to $200 billion by 2008?9;
to restore fiscal balance in the Operating and
Consolidated Accounts by 2008?9; and
bringing public expenditure down to 20 per cent
of GDP or below, so as to be in line with the
principle of ig Market, Small Government?
the latest forecast:
expenditure for 2004?5 will reduce to $201.2
billion, nearly hitting the $200 billion target;
expect fiscal balance to be restored in the
Operating Account by 2008?9 as scheduled, and in
the Consolidated Account by 2007?8, one year
ahead of our target; and
the share of public expenditure in GDP will
decrease to 20.2 per cent in 2005?6 and
is expected to fall below 20 per cent in
Although our financial position
has improved, we must not relax fiscal discipline or
substantially increase expenditure and reduce taxes just
because of good results in a single year.
Since the start of the recent bout of operating
deficits in 1998?9, our fiscal reserves have already
been depleted by about $170 billion, or 37 per cent.
As our economy consolidates, uncertainties for
our economic outlook remain.
is an international city and our economy is sensitive to
external factors. Any
changes in the economic outlook would require our
financial forecasts to be revised.
I would like to reiterate that we will continue
to manage our public finances prudently, keep
expenditure within the limits of revenues, strive to
achieve a fiscal balance, avoid deficits and keep the
budget commensurate with the growth rate of GDP.