Hong Kong: The Union Budget for fiscal year ending March 2021 (FY21) implies a modest degree of slippage from previous targets to consolidate public finances, Fitch Ratings said on Wednesday.
The budget projects a deficit of 3.5% in FY21 and implies a further postponement of the government's medium-term fiscal deficit target of 3% of GDP as it prioritises efforts to support economic growth in the context of the ongoing sharp slowdown.
A slippage of 0.5% of GDP in both FY20 and FY21 relative to the earlier targets is in line with the tendency for deficit outturns to exceed targets in the past few years.
Finance Minister Nirmala Sitharaman projected that the deficit will fall from 3.8% of GDP in FY20 to 3.5% in FY21.
"We believe most assumptions in the Budget, such as nominal GDP growth of 10% and a 9.2% rise in fiscal revenues, are credible," said Fitch.
"However, risks are likely skewed towards the downside, particularly for revenues in light of previously announced cuts in the corporate income tax rate and newly unveiled income tax rate reductions," it added.