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Hong Kong Country Risk Report 20 2018

Hong Kong Country Risk Report 20 2018

We continue to forecast Hong Kong's real GDP growth to cool to 3.0% in 2018 from 3.8% in 2017, with growth already showing signs of moderation in year-on-year (y-o-y) terms to 3.4% in Q417. Slowing mainland Chinese growth and rising interest rates will likely weigh on the city's economic activity over the coming quarters.

Universal suffrage has so far been rejected by the Chinese central government, and we see limited prospects for significant change in Hong Kong's political environment as Beijing is unlikely to yield on its existing position. Indeed, Chief Executive Carrie Lam was chosen by an election committee of approximately 1,200 people on March 26 2017 to lead the territory over the next five years. Beijing's grip on the city will therefore continue to strengthen over the coming years as the Xi administration maintains a politically conservative line. This will likely entail a further widening of the gulf between the electorate and the government, which could have negative implica-tions on Hong Kong's long-term social stability outlook.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Slower Expansion In 2018
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: TOP 5 GOOD EXPORTS
TABLE: TOP 5 GOODS IMPORTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
FY2018/19 Budget: Looking To Diversify Economy And Tackle Social Challenges
TABLE: PROPOSED TAX CHANGES
TABLE: KEY BUDGET MEASURES
Structural Fiscal Position
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
HKMA To Intervene To Maintain HKD Peg
Chapter 2: 10-Year Forecast
The Hong Kong Economy To 2027
Downshifting As China Cools Off
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
By-Elections Results Negative For Pro-Democracy Camp
Long-Term Political Outlook
Positive Outlook, But Social Challenges Increasing
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK SCORES
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR AND ORGANISED CRIME RISKS
Education
TABLE: HONG KONG AND OECD AVERAGE – PISA STUDENT PERFORMANCE SCORES
Chapter 5: BMI Global Macro Outlook
Trade Tensions Take Centre Stage
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: HONG KONG – MACROECONOMIC DATA & FORECASTS

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