03/08/2023
Despite slowing growth and tightening financial conditions around the world, and projected return to fiscal balance in about two years, exports of tourism services and domestic economic activity, in particular private consumption, are expected to normalize as border control and other COVID-related restrictions have been lifted in both Hong Kong SAR and Mainland China, easing policy uncertainty. As large slack in the economy will keep overall wage pressures moderate while housing rentals are likely to remain soft, inflation pressure is expected to remain muted with CPI inflation gradually rising to about 2¼ percent by end-2023. In the medium term, against a backdrop of an aging population, elevated private debt, and Mainland China’s secular growth slowdown, GDP growth is forecast to slow below 3 percent, but the ongoing economic integration with Mainland China (especially the Greater Bay Area) and the active promotion of innovation and technological development locally may avert the deceleration in potential growth.
