Economic Outline

Economic Indicators

As the tenth-largest trading power and the third-largest financial centre in the world in 2024, Hong Kong is often cited as a model of liberal economics. However, the economy has been experiencing a slowdown in recent years and is gradually recovering after three years of recession. The removal of COVID-19 restrictions in early 2023 led to a strong rebound in domestic demand and tourism, and a drop in unemployment to historic lows. However, recovery has slowed due to softening demand, high interest rates, and a sluggish property market. Regional competition has also impacted growth. Despite these challenges, the financial system remains resilient, supported by strong frameworks and liquidity buffers. With weak domestic demand, real GDP growth is expected to moderate to 2.7% in 2024, down from 3.3% in 2023. Growth is projected to reach 2.7% in 2025, then decelerate slightly to around 2½% over the medium term, driven by rapid population ageing and slower capital accumulation. The outlook remains highly uncertain, with key downside risks including a sharper-than-expected slowdown in Mainland China due to escalating trade tensions or a deeper, prolonged property market adjustment.

Concerning public finances, Hong Kong's deficit for this fiscal year is expected to be just below HKD 100 billion (USD 13 billion). The estimated deficit for the year ending in March is about double the previous forecast of HKD 48.1 billion in the budget presented in February 2024, attributed mainly to a sharp decline in land sales revenue. According to the IMF, although increasing, Hong Kong’s debt-to-GDP ratio is one of the lowest in the world: it stood at around 9% in 2024, from 6.3% one year earlier, and is expected to reach 13% by 2026. By the end of the third quarter of 2024, the gross external debt totalled USD 14,959.6 billion (4.8 times its GDP). As a major global financial centre, Hong Kong has a significant portion of external debt linked to the local banking sector through normal banking activities. At the end of the period, 54.1% of Hong Kong's external debt was attributed to the banking sector. The remainder mainly comprised external debt from other sectors (27.6%) and debt liabilities in direct investment (intercompany lending – 17.3%). For 2024, the underlying consumer price inflation rate averaged 1.1% (official governmental data). Looking ahead, overall inflation is expected to remain moderate in the near term. While the Hong Kong economy continues to grow, domestic costs may face some upward pressure. External price pressures are likely to stay contained, though uncertainties in the external environment should be monitored.

The IMF estimated a 1.1% rise in employment in 2024, with the unemployment rate decreasing to 2.8%, from the peak of 5.8% in 2020. Over the forecast horizon, the unemployment rate is expected to stabilize around 2.7%. Overall, Hong Kong citizens enjoy a high standard of living, with a GDP per capita (PPP) estimated at USD 75,128 in 2024 by the IMF; however, inequalities persist: according to Oxfam, in the first quarter of 2024, Hong Kong's overall poverty rate exceeded 20%, with 1.39 million people living in poverty, a 42.9% increase compared to the same period in 2019.

Any Comment About This Content? Report It to Us.