FULL EVENT: Hong Kong budget address 2026

Key Concepts

• Strong Economic Performance: Hong Kong experienced robust economic growth in 2025, driven by increased trade, financial market activity, and domestic demand.
• Fiscal Consolidation: The government is committed to fiscal balance through revenue enhancement and expenditure control.
• Strategic Investment: Significant investments are planned in infrastructure, innovation & technology, and social welfare programs.
• Northern Metropolis Development: The Northern Metropolis is a key priority for economic growth and integration with the Greater Bay Area.
• Innovation & Technology Focus: A strong emphasis is placed on fostering new quality productive forces, particularly in AI, biotech, and fintech.
• Talent Attraction: Various schemes are in place to attract and retain high-caliber talent.
• Alignment with National Development: Hong Kong is proactively aligning with the national 15-year plan.

Economic Review & Outlook

Hong Kong’s economy grew by 3.5% in 2025, marking the third consecutive year of expansion. This growth was fueled by a 12% increase in real terms for total exports of goods (particularly to mainland China and the RCN) and a 6.3% rise in exports of services. Domestic demand also strengthened, with private consumption expenditure increasing by 1.7% and overall investment expenditure accelerating to 4.3%. The unemployment rate stood at 3.8% in Q4, with median monthly employment earnings increasing by 4.2% year-on-year, while underlying inflation remained mild at 1.1%. The Hang Seng Index rose by 28%, daily debt turnover surged by 90% to $250 billion, and capital raised through IPOs exceeded $280 billion, ranking first globally. Residential property prices rose by 3.3%, ending a three-year decline.

Looking ahead, the global economic landscape is characterized by complication and volatility, but trade frictions have eased. Hong Kong’s economy is expected to sustain good momentum in 2026, with underlying and headline inflation forecast at 8% respectively. From 2027-2030, the economy is forecast to grow on average by 3% per annum, with underlying inflation averaging 2%. Risks include slower-than-expected US rate cuts and persistent protectionism.

Financial Strategies & Initiatives

The government is reinforcing its fiscal consolidation program, aiming for fiscal balance. Increased tax revenue, particularly from stamp duties and profits tax (nearly $50 billion), is projected to lead to an operating account surplus ahead of schedule. Several revenue enhancement measures are proposed, including a stamp duty increase on high-value residential properties (generating an estimated $1 billion annually), implementation of the OECD’s global minimum tax (yielding approximately $15 billion annually starting in 2027-28), consolidation of funds ($15.8 billion), and transferring bond fund surpluses ($37 billion) and Exchange Fund investment income ($150 billion) to the consolidated account.

Key financial initiatives include: establishing an advisory committee on tax policy; advancing “Project Ensemble TX” for real-value transactions involving tokenized deposits and digital assets; enhancing trade finance through Project CargoX; exploring tax incentives for gold trading; studying a one-stop post-trade securities infrastructure (CMU OmniClearar); extending the Insurance Link Securities Grand Scheme; and supporting the development of the Northern Metropolis. The Hong Kong IC has allocated over $62 billion to over 190 projects, attracting over $8 of long-term capital for each dollar invested, and will receive further capital injection. The Oasis office has attracted over 100 strategic enterprises, bringing in $60 billion of investment and creating 22,000 jobs.

Infrastructure & Development Plans

The Northern Metropolis is a key development area, with $10 billion injected into the Hong Shu Industry Park Company Limited. Dedicated legislation to accelerate NM development is planned. Transport infrastructure projects, including the Central Kowloon Bypass, Kuong station, Tong Chong Line extension, and Northern Link, are progressing. The Hong Kong International Airport is collaborating with Donguan on an intermodal cargo transshipment mode. Hong Kong aims to align with national maritime strategies, promote smart logistics, and expand its cargo hinterland. The government plans to raise the total borrowing ceiling for bond programs from $700 billion to $900 billion, with approximately $160-220 billion worth of bonds issued annually for the next five years.

Social Welfare & Community Support

Significant investments are planned in social welfare programs, including: $4 billion allocated for long-term housing arrangements following the Yau Ma Tei fire; enhanced subsidies for the URA’s smart tender scheme ($300 million); a new subsidy scheme for operation building by 2.0 ($3 billion); extending the lift modernization subsidy scheme ($1 billion); increasing community care vouchers for the elderly; expanding residential care services in the Greater Bay Area; increasing reemployment allowance ($222 million); and providing employment programs for elderly/middle age individuals. Healthcare initiatives include launching a primary healthcare network, a community drug formulary & pharmacy program, and extending an elderly healthcare voucher pilot.

Conclusion

The Hong Kong government’s financial plan demonstrates a commitment to fiscal responsibility, strategic investment, and sustainable development. By leveraging its connectivity with mainland China and the world, fostering innovation, and attracting talent, Hong Kong aims to maintain its position as a leading international financial center, trade hub, and vibrant city. The emphasis on aligning with the national 15-year plan and embracing new technologies positions Hong Kong for continued growth and prosperity in a dynamic global landscape. The projected fiscal reserves and economic forecasts suggest a stable and resilient future for the region.