IMF supports Hong Kong’s fiscal consolidation efforts

An International Monetary Fund (IMF) Staff Mission to Hong Kong supports the Government's efforts to reduce the structural deficit and ensure a credible and lasting fiscal consolidation. 

The mission expects the Hong Kong economy to grow by 7.5% amid strong domestic demand and exports. However, growth will moderate to 4% in 2005, reflecting a slowing in global growth and some easing of activity in the Mainland. Consumer prices are projected to increase by 1% in 2005. 

The mission urged the Government to take advantage of the current favourable macroeconomic environment to address Hong Kong's policy challenges in order to ensure robust and sustainable growth over the medium term.

This assessment was made by the IMF Mission in its Concluding Statement at the end of a visit to Hong Kong from October 26 to November 2 for the annual Article IV Consultation.

The mission noted that fiscal performance in Hong Kong has improved markedly, reflecting the strong recovery and implementation of deficit reduction measures. The mission commended the authorities for their expenditure restraint in the current economic upturn, and reiterated its recommendation to broaden the tax base and stabilise revenue through the adoption of a goods and services tax. It further recommended the Government develop an anchor to guide longer-term fiscal policy, taking into account fiscal pressures that are likely to arise from factors such as changing demographics. 

Mr Eswar Prasad, Division Chief of the IMF's Asia and Pacific Department, said the mission welcomed the authorities' commitment to eliminate the structural deficit. "It is essential that the authorities take advantage of the current favourable macroeconomic environment to forcefully address the long-standing structural deficit problem." 

Hong Kong’s Financial Secretary, Mr Henry Tang, said, "We welcome the IMF mission's assessment of the Hong Kong economy. We will continue to strengthen the financial infrastructure as well as supervisory and regulatory systems to maintain Hong Kong's position as a leading international financial centre.”  

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