Hong Kong Economic Forecast

Hong Kong Economic Outlook

December 13, 2018

Economic growth fell to a two-year low in the third quarter on the back of slowing private and public spending, though investment growth picked up thanks to a low base effect. Consumption was weighed on by losses in equity and property markets in the quarter, which suffered notably from higher interest rates and a loss of confidence mainly related to trade tensions affecting the mainland. The waning momentum furthermore appears to have continued in Q4. The PMI dropped further into negative territory in November on weak Chinese demand, and business confidence for Q4 also slipped. Meanwhile, though the Hang Seng Property Index pared back some of its losses in recent weeks, the broader equity index largely continued on its downward trend. Additionally, although retail sales growth picked up in October from September’s two-year low, it was still much lower than the readings seen earlier this year. Both these factors suggest private consumption is again losing steam in Q4, while the souring trade environment is likely to dampen external demand

Hong Kong Economic Growth

A combination of headwinds will likely cause growth to soften next year, most notably a structural slowdown in China exacerbated by the effects from its trade war with the United States. In addition, the property market is widely anticipated to continue tumbling in 2019. It should notably be hampered by rising interest rates and a stronger HKD compared to local partners’ currencies, which could also negatively affect stock prices. FocusEconomics panelists expect growth of 2.5% in 2019, which is down 0.1 percentage points from last month’s forecast, and 2.5% again in 2020.

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Hong Kong Facts

Bond Yield2.023.38 %Jan 16
Exchange Rate7.84-0.11 %Jan 16
Stock Market26,902-1.92 %Jan 16

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