Hong Kong Economic Forecast

Hong Kong Economic Outlook

May 21, 2019

Economic growth slumped to a near-decade low in Q1 2019, as private consumption stalled despite a healthy rebound in the stock and property markets, while the persistent drag from the U.S.-China trade war was likely partly responsible for contractions in fixed investment and goods exports. Turning to Q2, though little data is available yet the picture looks set to remain downbeat, despite a likely uptick in growth. The PMI notably remained mired in contraction in April, and the escalation of the trade war on 11 May—when the U.S. administration increased tariff rates on Chinese imports—is poised to further weigh on business confidence and investment unless a deal is reached swiftly. Moreover, weak April data in China suggests additional headwinds ahead. Although the next G20 summit on 28-29 June could provide an opportunity to defuse trade tensions, a trade deal now appears increasingly unlikely.

Hong Kong Economic Growth

External headwinds should dampen growth this year, amid heightened trade tensions and a structural mainland slowdown. On the flipside, the property market now appears less susceptible to a further correction, while a solid labor market should support private consumption. Nevertheless, the evolution of U.S.-China trade talks will remain critical to the outlook. Our panel expects growth of 2.3% in 2019, which is up 0.1 percentage points from last month’s forecast, and 2.4% in 2020.

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Hong Kong Facts

Bond Yield1.673.38 %Jun 13
Exchange Rate7.83-0.11 %Jun 13
Stock Market27,295-1.92 %Jun 13

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