Economic Outline

Economic Indicators

As the tenth-largest trading power and the third-largest financial centre in the world, Hong Kong is often cited as a model of liberal economics. However, after three years of recession the economy has now posted three consecutive years of expansion, with growth accelerating in 2025. 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. Supported by robust technology-related exports, improving private demand and a rebound in financial market activity, real GDP growth accelerated to 3.5% in 2025, up from 2.6% in 2024. Growth is projected to reach 2.4% in 2026, then decelerate slightly to around 2¼% over the medium term, driven by rapid population ageing and slower capital accumulation, although the Government raised its own 2026 forecast to 3.5-4.5% after GDP expanded by 5.1% in the first half of the year. 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 consolidated account for the 2025-26 fiscal year is now estimated to have closed with a surplus of HKD 2.9 billion (USD 0.4 billion) once bond issuance is taken into account. The outturn for the year ending in March is a sharp improvement on the deficit of about HKD 67 billion projected in the budget presented in February 2025, and fiscal reserves are put at HKD 657.2 billion at the end of March 2026. According to the IMF, although increasing, Hong Kong’s debt-to-GDP ratio is one of the lowest in the world: it stood at debt-to-GDP ... around 9% in 2024, from 6.3% one year earlier, and is expected to reach 13% by 2026. By the end of the first quarter of 2026, the gross external debt totalled HKD 16,630.4 billion (4.9 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, 53.1% of Hong Kong's external debt was attributed to the banking sector. The remainder mainly comprised external debt from other sectors (30.7%) and debt liabilities in direct investment (intercompany lending – 14.7%). For 2025, 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 0.6% fall in employment in 2025, with the unemployment rate climbing to an annual average of 3.7%, from 3.0% one year earlier. Over the forecast horizon, the unemployment rate is expected to ease to around 3.3% in 2026. 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.

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