An accountancy body on Thursday forecast a consolidated surplus of HK$4.1 billion for this fiscal year, raising the city's financial reserves to HK$658.4 billion.

According to the Association of Chartered Certified Accountants, the city’s economy showed strong recovery in 2025, with an estimated GDP growth of around 3.2 percent.

It said this rebound was driven by surging exports and recovering domestic demand, supported by global interest rate cuts and easing trade tensions.

Chairman Wilson Cheng said Hong Kong has returned to an overall surplus roughly three years earlier than originally projected by authorities.

"Over the past years, the estimates versus actual situations have had many uncontrollable factors, including the pandemic in 2021. As we move forward, we will gradually narrow this gap," he said.

"What’s important to note is that although there were deficits in the past few years, the magnitude of the deficit compared to forecasts has been gradually shrinking, indicating a smoother recovery of the economy.

"This year’s surplus is a clear sign of increasing momentum."

Ahead of next month’s budget announcement by the financial secretary, the association has submitted 15 recommendations to the government, focusing on accelerating the Northern Metropolis development to improving livelihoods.

The association identified the Northern Metropolis as the new engine for Hong Kong's future development and recommended introducing three favourable tax loss treatments for enterprises operating there.

These treatments would include group tax loss relief, which allows companies within the same group to share tax losses; tax loss carry-back relief, permitting a company to use a current-year loss to reduce tax paid in earlier profitable years; and a mechanism for startups to cash out of tax losses, converting them into immediate government payments to provide vital early-stage funding.

Another key recommendation is for preferential tax treatments on capital expenditures incurred by Northern Metropolis enterprises.

This includes "super tax depreciation allowances" for machinery and "accelerated tax depreciation" for buildings and structures.

"This comprehensive package is designed to reduce the risk of the substantial investment and improve cash flow for pioneering companies setting up in the area," said Cheng.

To strengthen the city's role as a super connector, the council also advocated for bilateral tax agreements and promoting Mutual Agreement Procedures to resolve cross-border tax disputes for mainland enterprises expanding overseas.

The association's proposal stated that these measures would enhance tax certainty, manage cross-border tax costs and risks and provide significant benefits to mainland enterprises using Hong Kong as an investment platform.

Further recommendations include strengthening Research and Development (R&D) tax policies to drive innovation by expanding the scope of deductible expenses and introducing a refundable R&D tax credit.

The association also proposed providing tax deductions for the cost of employing domestic helpers and caregivers, a measure aimed at easing financial burdens on middle-income households and incentivising individuals to re-enter the workforce.