Hong Kong government seen to record yet another year of sizeable fiscal surplus

Hang Seng Bank forecasts more than $60bn surplus.

The Financial Secretary, Mr. John Tsang, is scheduled to deliver his budget proposal to the Legislative Council on 27 February.

On hang Seng Bank's estimates, the government is likely to record yet another year of sizeable fiscal surplus." Up to the first nine months in FY2012/2013 (from April to December 2012), the government ran a surplus of HKD40 billion, against a HKD60 billion surplus for the same period in the previous financial year," said Ryan Lam.

With January-March being a typical tax-collection season and revenue from land sales also looks set to rise further, Hang Seng Bank said that the government is projected to end the financial year with a budget surplus more than HKD60 billion , as opposed to its original estimate of a deficit of HKD3.4 billion.

"That would mark the fourth-largest surplus on record. The amount is equivalent to about 3% of nominal GDP," said Lam.

Here's more ffrom Hang Seng Bank:

An estimated HKD60 billion surplus will propel the city’s fiscal reserves to an all-time high of HKD730 billion, amounting to 22 months of government expenditure.

This healthy position shall leave the government more room to announce an expansionary budget without necessarily compromising fiscal prudence. Some existing relief measures, such as public rental concessions and extra allowance for Comprehensive Social Security Assistance recipients, are likely to be extended even though we expect a modest amount of genuine fiscal stimulus.

With much attention on the change of governance principle and promoting long-term economic competitiveness in the Chief Executive’s recent Policy Address, we would not be surprised to see the introduction of tax incentives in the upcoming Budget to aid specific sectors of the economy.