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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:

  • reducing operating expenditure to $200 billion by 2008?9;

  • striving 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?

85.    Based on the latest forecast:

  • operating expenditure for 2004?5 will reduce to $201.2 billion, nearly hitting the $200 billion target;

  • we 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 2006?7.

86.    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.  Hong Kong 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.


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2004 | Important notices
Last revision date : 16 March, 2005