Hong Kong SAR, China: Economic and Political Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
As the tenth largest trading power and the third largest financial centre in the world in 2023, Hong Kong is often cited as a model of liberal economics. However, the economy has been experiencing a slowdown in recent years, with a GDP growth of -6.1% in 2020, against -1.2% in 2019. This slowdown results largely from the impact of the COVID-19 pandemic, but also from the cooling Chinese economy, trade tensions with the United States, decreased FDI, and tighter credit conditions forcing the Hong Kong Monetary Authority (HKMA) to imitate rate increases. According to Financial Times, Hong Kong’s economy has also suffered from the many protests in 2019 and 2020. Positive GDP growth came back in 2021 with + 6.3% (IMF, October 2022). According to the latest IMF forecasts growth is expected to decline at -0.8% in 2022 and come back in positive territory at 3.9% in 2023, subject to the post-pandemic global economic recovery.
Due to the impact of the global economic context of 2020, the Hong Kong Government closed the year 2020 with a -5.2% budget deficit from -3.3% in 2019. It recorded a Budget deficit equal to 3.60% of the country's Gross Domestic Product in 2021 (Hong-Kong Government, 2023). The protests and the export pressure from the US-China trade war also affect the government balance. Hong Kong continues to have solid public finances despite a public debt increasing from 1% of GDP in 2020 to 2.1% in 2021 and 3.3% in 2022. According to the IMF, the inflation rate was 1.6% in 2021 and 1.9% in 2022. Inflation rate should increase to 2.4% in 2023 and 2.5% in 2024 according to the latest World Economic Outlook of the IMF (October 2022). Credit expansion and a tight housing supply have caused Hong Kong property prices to rise rapidly in recent years. Lower and middle-income segments of the population are increasingly unable to afford adequate housing. Tourism is largely affected by the ongoing protests and pandemic and tourism from China (75% of total visitors) is also expected to remain weak because of slower economic growth in mainland China and the depreciation of the RMB in relation to the HKD.
The unemployment rate increased from 2.9% in 2019 to 5.8% in 2020 and 5.6% in 2021 but started to decline at 4.5% in 2022. The IMF expects a reduction in the unemployment rate to 4% in 2023 and 3.7% in 2024. Risks and opportunities coexist for Hong Kong. There are dawning signs of an end to the pandemic, and Hong Kong is resuming customs clearance with the outside gradually. In 2023, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 344.94 | 368.92 | 360.98 | 382.85 | 403.55 |
| GDP (Constant Prices, Annual % Change) | -6.5 | 6.4 | -3.5 | 3.5 | 3.1 |
| GDP per Capita (USD) | 46,446 | 49,845 | 49,226 | 52,429 | 55,220 |
| General Government Balance (in % of GDP) | -5.5 | 1.0 | -5.2 | -2.9 | -0.2 |
| General Government Gross Debt (in % of GDP) | 1.0 | 1.9 | 4.3 | 6.1 | 7.1 |
| Inflation Rate (%) | 0.3 | 1.6 | 1.9 | 2.3 | 2.4 |
| Unemployment Rate (% of the Labour Force) | 5.8 | 5.2 | 4.2 | 3.4 | 3.3 |
| Current Account (billions USD) | 24.12 | 43.53 | 38.72 | 30.57 | 26.24 |
| Current Account (in % of GDP) | 7.0 | 11.8 | 10.7 | 8.0 | 6.5 |
Source: IMF – World Economic Outlook Database, October 2021
Hong Kong relies heavily on financial services, production of electronics, and tourism as its main industries. The agricultural sector is almost non-existent since Hong Kong possesses no natural resources and is completely reliant on raw material and energy imports. The contribution of agriculture to the economy was practically null at 0.1% of GDP in 2022 and 0.1% of the workforce employed (World Bank, 2022). Hi-tech vertical farming is being adopted as an alternative to traditional farming (South China Morning Post). Concerns over food safety from Chinese products, have also been a factor in the boom of local farming initiatives (EcoWatch).
The manufacturing industry represents a larger, albeit still small share of GDP (6% in 2022) and employment with 11.5% of the workforce (World Bank, 2023). Main industries include electronics, electrical appliances, informatics and telecommunications. In 2022, the industrial sector stagnated.
The tertiary sector is the heart of Hong Kong's economy. Financial services, trading and logistics, tourism, import/export, air transport, professional and producer services are traditional key industries in Hong Kong. The services sector contributes around 89.6% of GDP and employed over 88% of the workforce in 2022 (World Bank, 2023). Hong Kong acts as a service centre for Asian companies, particularly for those trading with China. According to figures published by the Commercial Register, there are over 900 thousand companies registered in Hong Kong.
Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024 (International Monetary Fund - IMF, 2023). The impact of the 2022 world events appears to have affected both sides of most sectors and markets in this country for the third year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 0.2 | 11.1 | 88.8 |
| Value Added (in % of GDP) | 0.1 | 6.0 | 89.6 |
| Value Added (Annual % Change) | -2.8 | 2.1 | 5.8 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
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Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
