Core Viewpoint - The Hong Kong government's new budget proposal includes a transfer of HKD 150 billion from the Exchange Fund to support the development of the Northern Metropolis and other infrastructure projects, aiming to diversify the economy and attract various capital investments [1] Group 1: Budget Allocation and Economic Impact - The transfer of HKD 150 billion is intended to stimulate the market and encourage diverse capital participation in the Northern Metropolis development [1] - The Financial Secretary believes that this arrangement will help diversify Hong Kong's economy and strengthen the foundation of industries beyond just the service sector [1] Group 2: Communication with Rating Agencies - The Financial Secretary indicated that despite the transfer reducing the profitability of the Exchange Fund, it remains in positive growth and does not compromise risk resilience or financial stability [1] - There is a concern regarding the government's fiscal approach of using bond issuance as revenue, but the Financial Secretary emphasized that the fiscal accounts are maintained transparently and that the debt-to-GDP ratio is projected to be 19.9% by the fiscal year 2030-31, which is considered manageable [1]

Core Viewpoint - The Hong Kong government has revised its budget for the fiscal year 2025-26, projecting an overall revenue of approximately HKD 688.8 billion, which is 4.5% higher than the original budget [1]. Revenue Summary - The revised budget for stamp duty is HKD 99.5 billion, an increase of approximately HKD 31.9 billion due to active stock market trading and accelerated economic growth [2]. - The revised budget for profits tax has increased by approximately HKD 16.8 billion, while salaries tax revenue remains stable at HKD 209 billion and HKD 97 billion respectively, indicating strong economic resilience in Hong Kong [2]. - Government land revenue is projected at HKD 17.5 billion, a decrease of HKD 3.5 billion, attributed to a recovering residential property market and a relatively weak commercial property market [2]. Expenditure Summary - The overall expenditure for the government in the revised budget is HKD 789.2 billion, which is HKD 33.1 billion lower than the original budget [2]. - Regular expenditure is projected at HKD 572.4 billion, reflecting a reduction of HKD 15.7 billion from the original budget [2]. Financial Accounts Summary - The operating account is expected to shift from a projected deficit of approximately HKD 3 billion to a surplus of HKD 51.3 billion [3]. - The non-operating account is anticipated to remain in deficit due to low land revenue and increased spending on infrastructure projects related to economic and public welfare [3]. - After accounting for the issuance of HKD 155 billion in government bonds and the repayment of HKD 51.7 billion in maturing debt, the overall accounts are expected to transition from a projected deficit of approximately HKD 67 billion to a surplus of HKD 2.9 billion [3]. - The fiscal reserves are projected to be HKD 657.2 billion by March 31, 2026 [3].

Core Insights - Deloitte forecasts that the Hong Kong Special Administrative Region government will record a surplus of approximately HKD 15.6 billion for the current fiscal year, with fiscal reserves expected to increase to HKD 669.9 billion by the end of March 2026 [1] - The actual deficit for the Hong Kong government from April to September 2025 is projected at HKD 103.2 billion, a significant reduction compared to the same period last year, primarily due to increased stock stamp duty revenue and bond issuance, alongside a faster economic growth driving up operational income and various tax revenues [1] - Deloitte anticipates that the Hong Kong government may achieve fiscal balance in the 2025/2026 fiscal year [1] Recommendations for Government Budget - Deloitte suggests three key expectations for the upcoming government budget, including the development of the Northern Metropolis as a new growth engine for Hong Kong [1] - Strengthening Hong Kong's capital markets is highlighted as a priority [1] - Maintaining Hong Kong's competitive advantage as a regional asset and wealth management center, such as providing up to 50% investment tax credits for companies investing in the Northern Metropolis, optimizing taxes to promote dual listings, and encouraging capital investments [1]