Medium Range Forecast

170.    The global economy has seen rather low and unbalanced growth in recent years.  Uncertainties in the external economic environment will linger on in the next few years.  For the medium term, the average growth rate is forecast to be three per cent per annum in real terms from 2017 to 2020, lower than the trend growth of 3.4 per cent over the past ten years; and the underlying inflation rate is expected to average 2.5 per cent per annum.

171.    I forecast an annual surplus in the Operating Account and an annual deficit in the Capital Account in the four financial years from 2017-18.  There will be deficit in the Consolidated Account in 2018-19 and 2019-20, which mainly reflects Government's financial allocation for the healthcare reform and retirement protection.  On the whole, the financial position of Government over the medium term remains sound.

172.    Fiscal reserves are estimated at $835 billion by end-March 2021, representing 28.3 per cent of GDP or equivalent to 18 months of government expenditure.