Hong Kong Economic Forecast

Hong Kong Economic Outlook

November 14, 2017

The economy cooled in Q3, but nevertheless defied expectations of a sharper moderation as exports and household spending continued growing robustly. In Q3, the external sector benefited from the broad-based global upturn as exports of both goods and services lurched ahead—the latter due to greater cargo flows and the recovery in inbound tourism. Domestically, private consumption surged once again on full employment and solid real income growth, corroborated by this year’s turnaround in retail sales through September. Fixed investment, on the other hand, contracted as machinery and equipment acquisitions slumped, although building and construction appeared unaffected by the recent cool-off in the property market. Furthermore, October’s weaker PMI reading—marred by stagnant output and declining orders from mainland China—suggests that a rebound in investment may not be forthcoming before year-end, in line with expectations of a broader slowdown in Q4.

Hong Kong Economic Growth

An economic downshift appears to be underway after an outsized performance in H1, although the strength of the global economy has so far moderated the deceleration. That said, waning demand from mainland China is expected to restrain growth next year. Despite full employment and soaring asset values, household spending is expected to moderate in the medium term and weigh on domestic demand. Our analysts expect GDP to grow 2.5% in 2018, which is up 0.1 percentage point from last month’s forecast, and then tick up to 2.6% in 2019.

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Hong Kong Facts

Bond Yield1.893.38 %Dec 06
Exchange Rate7.81-0.11 %Dec 06
Stock Market28,225-1.92 %Dec 06

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