A Delicate Economic Landscape

SINGAPORE, August 19, 2025 – Hong Kong's economy is treading a fine line between risks and opportunities as it grapples with ongoing global trade tensions. The primary challenge lies in its vulnerability to shifts in international trade, particularly the strained relations between the US and China, which have slowed global commerce.

Amidst this unpredictability, Hong Kong's role as a vital 'super connector' between Mainland China and global markets has gained renewed significance, fostering financial activities and unveiling potential avenues for growth.

The Path Forward: Policy Recommendations

To bolster economic recovery, a sophisticated policy response is crucial. This includes timely support measures, market diversification, and attracting new growth sectors. These insights are highlighted in the 2025 Annual Consultation Report by the ASEAN+3 Macroeconomic Research Office (AMRO), which draws on field data collected in May 2025.

Current Economic Outlook

The first half of 2025 showcased relatively strong growth, fueled by increased trade activities and a rebound in tourism. However, the outlook for the latter half looks shaky due to ongoing uncertainties surrounding global trade protections. Growth is projected at 2.1% in 2025, slowing slightly to 1.9% in 2026.

Despite this, inflation rates are expected to remain manageable, with a forecast of 1.8% in 2025 and 1.6% in 2026.

Facing External Headwinds

Hong Kong is navigating external challenges stemming from protectionist policies of major economies and a decline in local consumption and investment. While direct impacts from US-China tensions on exports are limited, the broader effects may dampen demand for Hong Kong’s service exports.

Domestically, factors such as weak consumer spending and property market fluctuations pose additional challenges. A gradual recovery in investments is anticipated, contingent on a resurgence in the property sector.

Long-Term Challenges and Opportunities

Looking ahead, an aging population and increasing economic fragmentation pose significant long-term challenges. However, Hong Kong is uniquely positioned to capitalize on emerging opportunities. The uptick in financial activities illustrates its sustained attractiveness as an offshore fundraising hub for Mainland firms.

Strategic Government Initiatives

The government is urged to adopt proactive measures to cushion the economy against escalating risks, including targeted fiscal support for lower-income households and key sectors. Additionally, maintaining a stable property market is imperative.

As fiscal reserves dwindle, temporary yet effective support measures that are well-targeted can ensure a quick response during economic downturns.

Strengthening Hong Kong's Financial Position

AMRO commends the government’s commitment to fiscal consolidation. A comprehensive review of the tax system can provide diverse revenue streams and ensure long-term tax competitiveness. This includes broadening the tax base and exploring alternative sources of revenue.

Enhancing Hong Kong’s standing as a 'super connector' is vital as it links Mainland China to the global market, especially in the face of trade conflicts.

Diversifying Global Relationships

For sustained growth, Hong Kong must continue diversifying its economic ties and expanding its global reach, ensuring its stance as a major international business and finance center.