The Hong Kong Special Administrative Region government said on Wednesday that it remains in a solid fiscal position to improve people’s livelihoods, drive innovation and technology, and diversify the economy, following a better-than-expected surplus in its latest annual Budget.

In the 2026-27 Budget, the government reported higher-than-expected revenue of HK$688.8 billion ($89 billion) for the fiscal year 2025-26, and lower-than-expected expenditure of HK$789.2 billion.

As a result, the operating account forecast for 2025-26 shifted from an estimated HK$3 billion deficit to a HK$51.3 billion surplus. The consolidated account is expected to register a HK$2.9 billion surplus instead of the initially projected HK$67 billion deficit, after taking government bond issuances and repayments into account.

Fiscal reserves are expected to reach HK$657.2 billion by March 31.

Officials attributed the stronger fiscal outcome to a steady economic rebound, a buoyant capital market, and enhanced fiscal consolidation efforts.

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Chief Executive John Lee Ka-chiu said in a statement that this year’s Budget “leverages Hong Kong’s unique advantages of being connected to both the Chinese mainland and the world under the ‘one country, two systems’ principle in actively pursuing economic growth, advancing development, improving people’s livelihoods, seizing new development opportunities, and better integrating into and serving the overall national development”.

For the upcoming fiscal year, the administration forecasts expenditures of HK$843.4 billion and revenues of HK$765.2 billion, with a consolidated surplus of HK$22.1 billion. Fiscal reserves are expected to rise to HK$679.3 billion by March 31, 2027.

Over the coming five years, the administration expects operating surpluses between 2026 and 2030, although its capital account is forecast to record a deficit because of infrastructure spending and low land premium revenue.

At a media briefing, Hong Kong Financial Secretary Paul Chan Mo-po highlighted livelihood improvement measures in the Budget, such as raising tax exemptions for individuals, dependents, and children, and extending the pilot program for elderly medical vouchers. “The total amount involved is nearly HK$22 billion, 1.8 times more than last year’s HK$7.8 billion,” he said.

Chan forecast GDP growth of 2.5-3.5 percent in 2026, despite lingering uncertainties in global trade and a slower-than-expected pace of United States rate cuts. The underlying inflation and headline inflation are expected to be 1.7 percent and 1.8 percent respectively this year.

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He added, “We forecast that Hong Kong’s economy will grow on average 3 percent per annum in real terms from 2027 to 2030, with the underlying inflation averaging 2 percent a year.”

Business and industry leaders welcomed the Budget, describing it as prudent yet forward-looking.

Agnes Chan Sui-kuen, chairwoman of the Hong Kong General Chamber of Commerce, said the Budget “provides a balanced response to the current economic landscape with policies that support various stakeholders, promote growth, and maintain long-term stability”.

“The financial secretary has laid the foundations for our long-term growth and competitiveness by dovetailing with the national 15th Five-Year Plan (2026-30),” she added.

PricewaterhouseCoopers China Economist Jackie Yan described the Budget as “a balanced, forward-thinking strategy that secures fiscal stability and strengthens financial resilience amid steady economic momentum, while elevating Hong Kong’s role in national development and the Guangdong-Hong Kong-Macao Greater Bay Area”.

Lee Jia Yu, assistant economist at Oxford Economics, said the improving fiscal condition allows the government to continue supporting households and small- and medium-sized enterprises through tax relief.

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The economist also said that measures to cultivate innovation and technology will boost Hong Kong’s long-term competitiveness and productivity, in line with the mainland’s technological ambitions.

“Although Hong Kong’s capital account is expected to remain in deficit to fund infrastructure projects — potentially increasing public debt to 19.9 percent of GDP by 2029-30 — we remain confident in Hong Kong’s fiscal condition given the improving macroeconomic outlook, resilient fiscal reserves, and government fiscal discipline,” Lee Jia Yu said.

Anthony Lam Sai-ho, chairman of the Federation of Hong Kong Industries, said he hopes the government will continue to review and optimize support measures for SMEs, and accelerate the development of a cross-sectoral professional service platform to assist businesses seeking to expand abroad.