Accountancy firm Deloitte on Friday said it expects the Hong Kong government to have a budget deficit of HK$131.6 billion this year.

Last week, Financial Secretary Paul Chan forecast a deficit of more than HK$100 billion.

Polly Wan, tax partner at Deloitte China, said they expect Hong Kong's fiscal reserves to decline to HK$703.2 billion by the end of the year, from HK$834.8 billion last year.

She said the authorities should consider reducing taxes to encourage more companies to invest in the SAR.

"We believe that if the economy is good, people are more willing to do more investments, the increase in revenue can compensate the reduction in tax rates," Wan said.