Hong Kong aims to cut public recurrent expenditure by 7% from now until 2027/28 to address a rising deficit and plans a significant push into artificial intelligence (AI) as it navigates global economic uncertainty, geopolitical tensions, and a weak property market.
“It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner,” said Financial Secretary Paul Chan while announcing the financial hub’s annual budget.
Mr. Chan emphasized that the “reinforced” fiscal consolidation program lays a “sustainable fiscal foundation for future development” following a sharp decline in revenue from land sales over the past financial year. He warned that “geopolitics will still bring challenges to Hong Kong’s economy,” with GDP forecasted to grow between 2-3% this year.
The upcoming financial year, starting April 1, presents fresh economic challenges for Hong Kong, as US President Donald Trump’s tariff policies threaten to impact global growth. Mr. Trump has imposed additional tariffs of 10% on goods from China and Hong Kong, which the financial hub’s government has criticized, stating that Washington has ignored the city’s status as a separate customs territory.
In line with China’s strategic push into AI and other high technology sectors, including robotics, Chan announced that Hong Kong would place AI as a core industry. The government has allocated HK$1 billion (S$172 million) to establish an AI Research and Development Institute2. This initiative aims to boost innovation and technology, providing a sustainable foundation for Hong Kong’s future economic landscape.
The budget also responds to the sharp decline in revenue from land sales during the last financial year. While GDP is expected to grow between 2-3%, Chan warned of ongoing geopolitical challenges impacting the economy. The fiscal consolidation initiative aims to provide a sustainable foundation for Hong Kong’s future fiscal landscape. Facing new economic hurdles, Hong Kong plans a substantial investment in artificial intelligence, dedicating HK$1 billion towards establishing an AI Research and Development institute. This aligns with China’s broader technological ambitions, particularly in AI and robotics, and addresses the geopolitical stressors, including tariffs imposed by the U.S. (With inputs from agencies.) Hong Kong plans a 7% cut in public spending and a major AI investment to tackle economic challenges. Financial Secretary Paul Chan emphasizes fiscal consolidation and growth projections amidst geopolitical tensions. An AI industry boost is part of aligning with China’s strategic technological advancements.”],”lastUpdatedDate”:”2/26/2025 4:09:00 AM”}],”WebPages”:[{“title”:”Hong Kong flags spending cut, AI push in bid to reverse booming deficit”,”url”:”1″,”snippets”:[“Hong Kong flags spending cut, AI push in bid to reverse booming deficit | The Straits Times Hong Kong flags spending cut, AI push in bid to reverse booming deficit Hong Kong’s Financial Secretary Paul Chan presents the annual budget for 2025-26 at the Legislative Council of Hong Kong, on Feb 26.. PHOTO: EPA-EFE UPDATED Feb 26, 2025, 01:10 PM HONG KONG – Hong Kong aims to cut public recurrent expenditure by 7 per cent from now till 2027/28 to rein in a rising deficit and plans a big AI push as it tries to mitigate headwinds from global economic uncertainty, geopolitical tensions and a weak property market. “It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner,” said the city’s Financial Secretary Paul Chan in announcing the financial hub’s annual budget. Mr Chan said the “reinforced” fiscal consolidation programme lay a “sustainable fiscal foundation for future development” after a sharp fall in revenue from land sales over the past financial year. He warned “geopolitics will still bring challenges to Hong Kong’s economy” with GDP forecast to grow between 2-3 per cent this year. The next financial year, starting April 1, presents fresh economic challenges for Hong Kong, as US President Donald Trump’s tariff policies threaten to dent global growth. Mr Trump has imposed additional tariffs of 10 per cent on goods from China and also Hong Kong, which the financial hub’s government has criticised, saying Washington has ignored the city’s status as a separate customs territory. In line with China’s growing strategic push into AI and other high technology sectors including robotics, Chan said Hong Kong would place AI as a core industry with HK$1 billion (S$172 million) to be used to set up an AI Research and development institute. REUTERS More on this Topic Well-off Hong Kong daunted by record deficits Tale of two cities: Has Shenzhen eclipsed Hong Kong? Join ST’s Telegram channel and get the latest breaking news delivered to you. Hong Kong Economic affairs Budget It aims to cut public recurrent expenditure by 7 per cent. Read more at straitstimes.com.”]},{“title”:”news.gov.hk – Budget reinforces fiscal consolidation”,”url”:”5″,”snippets”:[“news.gov.hk – Budget reinforces fiscal consolidation BUSINESS & FINANCE Home Business & Finance Budget reinforces fiscal consolidation Budget reinforces fiscal consolidation February 26, 2025 Financial Secretary Paul Chan said in his Budget speech today that he is pursuing a “reinforced version” of the Government’s fiscal consolidation programme, as he committed to strictly containing public expenditure while minimising the impact on public services and livelihoods. Mr Chan stated that the reinforced version of the programme involves a cumulative reduction of government recurrent expenditure by 7% from now through 2027-28. He stressed that the Government will proceed in a steady and prudent manner, and that the reinforced programme gives a clear pathway towards the goal of restoring fiscal balance in a planned and progressive manner within the Government’s current term. To seize on opportunities brought about by the rapid advancement of innovation and technology, the Government will accelerate the development of the Northern Metropolis (NM). Mr Chan described this as an investment in Hong Kong’s future. “In the midst of global changes, technological innovation is our core engine,” he said. “We must expedite our economic development, in particular boosting new economic driving forces while enhancing the competitive edge of traditional industries at an accelerated pace.” The Financial Secretary highlighted that an unstable international geopolitical situation, escalating trade conflicts, and elevated global interest rates last year exerted adverse impacts on local economic activity and confidence. Nevertheless, the central government rolled out measures that have benefitted Hong Kong, he said. These measures, together with the Government’s own initiatives to support the economy, and interest rate cuts in the US since mid-September, have boosted different economic segments in Hong Kong. Accordingly, the city’s economy recorded moderate growth of 2.5% last year. As a result of various measures enacted by the central authorities, the promotion of mega events organised in Hong Kong throughout the year, and the recovery of the city’s air traffic capacity, the number of visitors increased by 30% to about 45 million last year. Total exports of services grew 4.8% for the year. The labour market remained tight. The latest unemployment rate stayed low at 3.1%, while the median monthly employment earnings of full-time employees grew a solid 4.8%, year-on-year, in the fourth quarter of last year. Inflation was mild overall. Netting out the effects of the Government’s one-off measures, the underlying consumer price inflation rate was 1.1% last year. The residential property market continued to adjust in the first three quarters of last year, but it stabilised following the interest rate cuts. For the year, the number of transactions increased by 23% to about 53,000, while property prices fell 7%. The non-residential property market remained stagnant. Looking ahead, Mr Chan stressed trade protectionism affects global trade and capital flows, dampens investment and consumer confidence, and weighs on global economic growth.”]},{“title”:”Pay freezes and spending cuts to tackle budget deficit”,”url”:”6″,”snippets”: