This picture taken with a fisheye lens shows people crossing a road in the Wan Chai district of Hong Kong on Oct 5, 2021. (PETER PARKS / AFP)

In the backdrop of a challenging external economic and political environment, Financial Secretary Paul Chan Mo-po is certain to once again tread the path of prudence on Feb 23.

READ MORE: Paul Chan open-minded on new round of consumption vouchers

He will follow the principle of keeping spending within the limits of revenue and ensure that expenditure growth is in proportion to the economic uptick.

An important focus in the budget, generally, would be to protect people’s welfare and livelihoods, and to try to foster growth potential. After two years of shocks, fiscal reserves are resilient.

William Deng, UBS Global Research, North Asia economist

Chan will also take heart from the IMF observations of a strong but uneven recovery and some structural challenges such as housing, and praise for the “swift and bold policy responses,” especially fiscal stimulus aimed at softening blows from multiple shocks. The IMF predicts real GDP growth of 6.4 percent in 2021 and urged reforms to broaden the tax base, while considering the introduction of taxes on capital gains and dividends.

UBS Global Research, North Asia Economist, William Deng, said: “We are reserved in giving an explicit forecast given the close timeline of the budget. However, there are elements the government could focus on in delivering spending. The government will continue to offer support to households, especially to those still facing difficulty given the prolonged COVID-19 challenges. We have seen the fifth batch of measures under the Anti-Epidemic Fund.”

ALSO READ: HK budget deficit on course to be well below govt's forecast

Funding of HK$3.57 billion ($481,725,000) was announced by Chief Executive Carrie Lam Cheng Yuet-ngor on Jan 14.

“Also in the policy address, the Chief Executive Carrie Lam announced HK$100 billion infrastructure spending every year,” Deng said.

Lam announced a record HK$220 billion approved capital works projects funding.

Deng said Paul Chan could outline more details of this spending.

“An important focus in the budget, generally, would be to protect people’s welfare and livelihoods, and to try to foster growth potential. After two years of shocks, fiscal reserves are resilient.”

Fiscal reserves were at HK$862 billion as of end November, 2021, data show. This includes HK$219.69 billion balance of the Land Fund held under the Future Fund.