TNAG-1766-FCO40-2520-Hong-Kong-Budget-Appropriation-Ordinance-1988-(No.-23-of-198-1988 — Page 49

The Medium Range Forecast

31.

Members will by now be familiar with the Medium

Range Forecast, which we use to formulate Our budgetary

strategy. The forecast for the period up to 1991-92 is shown in

an Appendix to the printed version of this Speech and I commend

it as a document for careful study (16). Because it forms the

basis for my specific budget proposals for 1988-89, I shall

highlight some of the more important features of this forecast.

32.

First, while both performance and projections of

government expenditure remain close to previous forecasts, revenue is running well ahead of earlier expectations. Two years of rapid economic growth have

have lifted tax yields to a

higher base. If no further fiscal measures were taken, our

average surplus over the forecast period up to 1991-92 would run

at about $5.9 billion a year.

33.

Secondly, this level of surplus is well in excess of

the $2 billion or so that we need each year just to maintain the

real value of our reserves. It reflects the underlying strength

of our position and gives us some room for manoeuvre.

34.

And thirdly, government expenditure in Consolidated

Account terms as a proportion of GDP is forecast to remain slightly below the 16% mark, around which it has been maintained

in recent years. Our aim of not crowding out the private sector

with public sector demand

is being achieved.

This is

particularly important at а time when our economy is already running up against capacity constraints.

(16) Appendix A.

/35.

H

If