Ernst & Young predicts a fiscal surplus of HK$12 billion for 2013-14

Find out what caused the turnaround.

According to Ernst & Young, they estimate that instead of the originally budgeted deficit of HK$4.9 billion, the final result for the year 2013-14 will be a surplus of HK$12 billion. 

The forecast turnaround is mainly due to reduced levels of expenditure and higher land premiums more than compensating for an estimated fall in stamp duty revenues.

Here's more from Ernst & Young:

EY’s estimated surplus would increase Hong Kong’s fiscal reserves to HK$745.9 billion by the end of 31 March 2014.

Agnes Chan, Managing Partner, Hong Kong and Macau at EY, says: “The series of anti-speculation stamp duty measures introduced by the government since October 2012 have reined in price rises in the property market. While overall property prices have only recorded a slight increase during the first half of 2013, transaction volumes have declined noticeably since February 2013. The fall in the number of property transactions will lower the stamp duty revenue from this source. The drop in stamp duty from property transactions would however be largely offset by the collection of additional stamp duty from share transactions due to improving investor sentiment.”

Overall, EY expects that stamp duty revenue will only record a slight shortfall of HK$2 billion from the original budget estimate.

As regards revenue from land premium, EY estimates that it will still exceed the original budget estimate by HK$8.4 billion given that the government has already successfully sold many pieces of land in the first seven months of the year.

“On the expenditure side, by reference to past trends and based on government expenditures incurred in the first 6 months of the year, we estimate that actual government expenditures for the year 2013-14 will be HK$10.5 billion less than budgeted. On the above basis, we estimate that the original estimated deficit of HK$4.9 billion will turn into a surplus of HK$12 billion for the year 2013-14.” Agnes Chan adds.