Hong Kong Economic Forecast

Hong Kong Economic Outlook

January 22, 2019

The economy likely remained on a weak footing in the last quarter after slowing in Q3. As in the previous period, the fourth quarter print was likely weighed by diminishing private spending growth and external demand, due both to ripple effects from the U.S.-China trade war and an ongoing cooling of the property market. Indeed, the average PMI reading over the quarter was slightly under Q3’s already feeble showing, caused primarily by weak mainland demand and trade concerns. These effects also translated into lower business confidence in the quarter. Meanwhile, after a decent print in October, retail sales were meek in November despite high inflows of Chinese tourists. Lastly, merchandise exports contracted unexpectedly in November for the first time since January 2017. Although the ceasefire negotiated between China and the U.S. in December should somewhat reduce trade-related blows in Q1, the truce still appears fragile and underlying tensions are likely to resurface quickly after it ends on 2 March.

Hong Kong Economic Growth

Growth headwinds appear poised to weaken economic momentum this year. In addition to the structural slowdown in China and the trade war effects, a key downside risk stems from the property market, which is expected to continue its correction in coming months due to rising interest rates and a stronger local currency compared to local partners’—particularly the yuan. On the flipside, public investment projects should support the outlook. Met the why particular panelists expect growth of 2.4% in 2019, which is down 0.1 percentage points from last month’s forecast, and 2.4% again in 2020.

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Hong Kong Facts

Bond Yield1.913.38 %Jan 30
Exchange Rate7.84-0.11 %Jan 30
Stock Market27,643-1.92 %Jan 30

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