Hong Kong Economic Forecast

Hong Kong Economic Outlook

August 25, 2020

GDP declined severely in Q2, after contracting at the steepest pace on record in Q1. The unemployment rate rose to its highest level since Q4 2004 in Q2, while retail sales plummeted by nearly a third in the same period. As a result, private consumption declined at the fastest pace on record in Q2. Moreover, fixed investment dived at the sharpest pace in over two decades, while exports continued to fall. Turning to Q3, a high unemployment rate and the declining PMI point to sustained deterioration in the labor market and business conditions. On the political front, the anti-subversion law imposed by China in June is stoking major economic uncertainty. Consequently, the U.S. sanctioned some government officials and suspended economic privileges under the Hong Kong Policy Act on 7 August. The possibility of further sanctions poses a significant risk to business investment going forward.

Hong Kong Economic Growth

The economy is expected to decline this year at one of the sharpest rates on record amid the constraining effects of lockdown measures and as weaker growth in mainland China weighs on activity. Moreover, the recent anti-subversion law should weigh heavily on business investment. Nevertheless, strong fiscal stimulus should support a partial recovery in H2. Our panel projects the economy will contract 6.4% in 2020, which is down 0.8 percentage points from last month’s forecast. In 2021, the panel sees the economy growing 4.3%.

Hong Kong Economy Data

2015 2016 2017 2018 2019
Population (million)7.37.47.47.57.6
GDP per capita (USD)42,31943,49146,03748,32348,380
GDP (USD bn)309321341362366
Economic Growth (GDP, annual variation in %)2.42.23.82.8-1.2
Domestic Demand (annual variation in %)1.52.55.24.3-3.5
Consumption (annual variation in %)4.82.05.55.3-1.1
Investment (annual variation in %)-3.2-0.13.11.7-12.3
Retail Sales (annual variation in %)-1.5-7.11.97.6-12.3
Unemployment Rate3.33.43.22.82.9
Fiscal Balance (% of GDP)0.64.55.62.4-  
Public Debt (% of GDP)0.10.10.10.10.3
Money (annual variation in %)5.57.710.04.32.8
Inflation Rate (CPI, annual variation in %, eop)2.31.21.72.62.9
Inflation Rate (CPI, annual variation in %)3.02.41.52.42.9
Inflation (PPI, annual variation in %)-2.81.33.82.01.0
Benchmark Interest Rate (%)0.391.021.312.332.43
Stock Market (annual variation in %)-7.20.436.0-13.69.1
Exchange Rate (vs USD)7.757.757.817.837.79
Exchange Rate (vs USD, aop)7.757.767.797.847.84
Current Account (% of GDP)3.34.04.63.76.2
Current Account Balance (USD bn)10.312.715.914.822.7
Trade Balance (USD billion)-57.1-54.5-61.9-71.7-54.1
Exports (USD billion)465462498531510
Imports (USD billion)523517559603564
Exports (annual variation in %)-1.8-0.67.66.8-4.0
Imports (annual variation in %)-4.1-1.18.27.8-6.5
International Reserves (USD)359386431425441
External Debt (% of GDP)420423461469457

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Hong Kong Facts

Value Change Date
Bond Yield1.823.38 %Dec 31
Exchange Rate7.79-0.11 %Jan 01

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