UBS Investment Bank expects Hong Kong to end three consecutive years of deficits, raising this year's GDP growth forecast to 3.3%

UBS Investment Bank's research department pointed out that Hong Kong is expected to record an overall fiscal surplus in the 2025/26 fiscal year, ending three consecutive years of deficits. Additionally, it has raised Hong Kong's economic growth forecast for this year from the original 2.3% to 3.3%, higher than the market consensus of 2.5%, and at the upper limit of the consensus forecast.

Deng Weishen, Senior Asian Economic Analyst at UBS Investment Bank, stated that the fiscal performance is significantly better than the previously budgeted deficit of HKD 67 billion. After excluding the impact of bond financing, the fiscal situation remains one of the best in recent years, with the improvement primarily driven by the financial markets rather than a rebound in land revenue.

He mentioned that the reasons for raising this year's economic growth forecast for Hong Kong include better-than-expected regional trade performance, Hong Kong's continued role as a high-value trade and financial hub, the financial sector maintaining its primary growth momentum, and traditional industries (such as real estate and tourism) showing signs of stability and recovery.

Looking ahead to fiscal policy, Deng Weishen indicated that in the upcoming budget announcement on February 25, the government may plan to maintain a slight overall fiscal surplus in the 2026/27 fiscal year. Future bond financing is expected to focus on promoting long-term growth capital expenditures, including the Northern Metropolis, artificial intelligence and technological innovation, infrastructure connectivity in the Guangdong-Hong Kong-Macao Greater Bay Area, and projects related to the "14th Five-Year Plan."

Deng Weishen concluded that Hong Kong still has ample fiscal space to utilize fiscal reserves for counter-cyclical support in the event of external shocks or a significant economic slowdown