Budget Speech

155.      I will now give a brief account of the revised estimates for 2009-10 and the estimates for 2010-11.

156.      In preparing the 2009-10 Budget, I made an estimate of government revenue that reflected the downslide in the global economy and the highly volatile financial markets back then. However, the economy showed signs of gradual improvement from the second quarter of 2009, leading to better-than-expected revenues. The huge inflow of funds resulting from the global low-interest environment and the quantitative easing policy adopted by the many countries has given rise to hectic trading in both the stock and the property markets. As a result, revenue from stamp duties reaches $40.5 billion, which is higher than the original estimate by $15.5 billion. The revised estimate for operating revenue is $255 billion. The revised estimate for land revenue is $37.3 billion, more than double the original estimate. The revised total revenue is $308.5 billion, $46.8 billion higher than the original estimate.

157.      The revised estimate for operating expenditure is $236 billion, slightly lower than the original estimate. With a number of public works projects entering their construction peaks, capital expenditure is expected to reach $55.2 billion, and total expenditure will be $291.2 billion.

158.      Overall, I forecast a surplus of $19 billion in the Operating Account for 2009-10. For the Consolidated Account, after repayment of government bonds, I forecast a surplus of $13.8 billion, equivalent to 0.8 per cent of our GDP. By 31 March 2010, our fiscal reserves will have increased to $508.2 billion.

159.      In 2010-11, I will continue to invest in infrastructure, promote the development of our industries and adopt various measures to achieve the objectives of consolidating the recovery, developing our economy and building a caring society. Operating expenditure for 2010-11 will be $251.4 billion, an increase of 6.5 per cent over 2009-10.

160.      Capital expenditure for 2010-11 is estimated to be $65.8 billion, including $49.6 billion in capital works, which is an all-time high. I forecast that total government expenditure will reach $317.2 billion, an increase of $26 billion, or 8.9 per cent, over 2009-10. Public expenditure will be equivalent to 19.8 per cent of our GDP.

161.      I estimate that total government revenue for 2010-11 will be $292 billion. Earnings and profits tax, which will still be our major source of revenue, are estimated at $123 billion.

162.      Taking all these into account, I forecast a deficit of $3.8 billion in the Operating Account and a deficit of $21.4 billion in the Capital Account. This will result in a deficit of $25.2 billion in the Consolidated Account, equivalent to 1.5 per cent of our GDP. Fiscal reserves are estimated at $483 billion by end-March 2011, representing approximately 28 per cent of our GDP and equivalent to 18 months of government expenditure.

163.      At this early stage of recovery, we need to maintain government expenditure at a certain level to fortify the momentum of our domestic economy. Where affordable and without compromising our long-term financial integrity, I consider it necessary to continue to run a budget deficit in the next financial year so as to ensure a solid economic recovery without exerting excessive pressure on inflation.

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