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Hong Kong Country Risk Report Q4 2018

Hong Kong Country Risk Report Q4 2018

Despite Hong Kong's real GDP growth registering the fastest quarterly y-o-y expansion since 2011, we believe that the economy will face challenges over the coming quarters from rising interest rates and increased external uncertainties stemming from escalating trade tensions between the US and China.

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 en-vironment as Beijing is unlikely to yield on its existing position. 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-state 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 implications on Hong Kong's long-term social stability outlook.

Major Forecast Changes

We have revised up our 2018 real GDP growth forecast to 4.0% to reflect the 4.7% y-o-y surge in Q118, and we believe that this acceleration in growth is unlikely to be sustainable over the coming quarters.

Key Risks

The potential for a financial or economic crisis in China continues to be by far the biggest risk factor for Hong Kong. Such a crisis would hit Hong Kong hard given its deep trade and financial linkages to the mainland and the high proportion that financial and trade services comprise Hong Kong's economy.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic - SWOT Analysis
Political - SWOT Analysis
Economic Outlook
Economic Growth Outlook
Revising Up Hong Kong's 2018 Forecasts, But Q118 Surge Questionable
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: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
10-Year Forecast
The Hong Kong Economy To 2027
Downshifting As China Cools Off
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Hong Kong Country Risk Q4 2018ContentsPolitical Outlook
Domestic Politics
Hong Kong's Pro-Democracy Calls To Be Suppressed
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Benign Outlook Despite Rising Social Difficulties
Global Macro Outlook
Pressure On EM Grows, As Do Divergences
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: HONG KONG – MACROECONOMIC DATA & FORECASTS

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