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2020-21 Government revenue and expenditure (estimated)

Total government revenue for 2020-21 is estimated to be HKD 572.5 billion (2019-20: HKD 626.1 billion), within which tax revenues (i.e., Profits Tax, Stamp Duty, Salaries Tax) account for 46.5% (2019-20: 48%), followed by land premium at 20.6% (2019-20: 22.8%) and investment income at 9.9% (2019-20: 7.7%). Total government expenditure is estimated at HKD 731.1 billion (2019-20: HKD 607.8 billion). Education, social welfare and healthcare account for about 45% (2019-20: 51%) of total government expenditure. The government forecasts an overall consolidated deficit of HKD 139.1 billion for 2020-21. This has taken into account the launch of countercyclical fiscal measures and the continued increase in recurrent expenditure. Hong Kong’s fiscal reserve will remain strong at about HKD 994 billion at 31 March 2021. Fiscal reserves are estimated at HKD 937.1 billion by the end of March 2025, which is equal to about 15 months of government expenditure.

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9.9% Investment income
10.5% Salaries Tax
13.1% Stamp duty
20.6% Land premium
22.9% Profits Tax
23.0% Other revenue
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16.5% Economy
15.7% Social welfare
15.4% Education
13.9% Others
13.4% Health
10.7% Infrastructure
9.0% Security
5.4% Environment and food
2020-21 Government revenue and expenditure (estimated)
2020-2021
Government
revenue
(estimated)
2020-2021
Government
expenditure
(estimated)

Source: 2020-21 Budget Speech by the financial secretary

Real gross domestic product growth rate

Overall, the Hong Kong economy contracted 1.2% year-on-year due to weak domestic and external demand amid the social unrest, and the US-China trade tensions. These events took a heavy toll on Hong Kong’s consumption and tourism sectors, impacting both domestic private expenditure and inbound tourism.  While the economic outlook for 2020 is still subject to significant challenges, notably the coronavirus (COVID-19) outbreak. Hong Kong’s economy, supported by healthy fiscal reserves, remains resilient and capable of weathering these internal and external economic headwinds.

(%)
legend Real gross domestic product growth rate Real gross domestic product growth rate legend 2020 forecast range 2020 forecast range

Source: Census and Statistics Department’s website

Underlying inflation rate

The underlying inflation rate in 2019 was estimated to be 3%, partly reflecting the impact of the government’s one-off relief measures during the past months. Looking ahead, the 2020 outlook is still subject to uncertainties, including the pace of global economic recovery, US-China trade relations, social incidents, and the effect of the coronavirus outbreak in Hong Kong and elsewhere in Asia. While the impact of the coronavirus is seen as being temporary, domestic consumption and tourism will likely only show signs of recovery during the latter half of 2020.

(%)
legend Underlying inflation rate Underlying inflation rate legend 2020 forecast 2020 forecast

Source: Census and Statistics Department’s website

Unemployment rate

The unemployment rate in Hong Kong was 3% overall in 2019. That said, the consumption and tourism-related sectors have been significantly affected by social events and the coronavirus outbreak, the unemployment rate can be expected to rise.

(%)
legend Unemployment rate Unemployment rate

Source: Census and Statistics Department’s website

© 2020 KPMG Tax Services Limited, a Hong Kong limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

© 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.