Economic Growth & Outlook
Hong Kong’s economy continued to expand, with GDP growth reaching 3.1% year-on-year
in Q2 2025, up from 3.0% in Q1 and 2.5% in Q4 2024. This growth was powered by
strong export performance and a rebound in domestic demand
Reuters
+1
. Seasonally adjusted, GDP rose 0.4% in Q2
Reuters
+1
.
Forecasts for full-year 2025 vary:
Mastercard Economics Institute expects growth of 2.2%
Mastercard
.
Another projection estimates around 2.3%, slightly below the 2.5% seen in 2024
China Briefing
.
Looking further ahead, the government forecasts average annual growth of 2.9% from
2026 to 2029
[Link]
.
2. Trade Trends & External Sector
Merchandise Trade (2024)
Exports of goods rose 8.7%, with imports up 6.0%, resulting in a trade deficit
equivalent to 7.7% of imports
Hong Kong Information Agency
Trading Economics
.
December 2024 alone saw exports up 5.2% and imports down 1.1%, producing a visible
trade deficit of US$34.5 billion
Hong Kong Information Agency
.
Electronics dominated exports: electrical/electronic equipment ($368 B), machinery
($94 B), and pearls/precious stones ($92 B) were top commodities in 2024
Trading Economics
[Link]
.
Trade Destinations & Growth Drivers
Primary export markets: Mainland China, the U.S., and Vietnam
Trading Economics
[Link]
.
Strong growth in exports to Asia (Vietnam +49%, Philippines +33.8%, Mainland China
+14.9%) in December 2024. Meanwhile, exports to regions like the UK, Netherlands,
and the USA declined
Hong Kong Information Agency
.
Early 2024 saw a 12.5% year-on-year export surge (Jan–May), driven by electronics
(+15.5%) and intermediate goods exports to Mainland China (+21.1%) and ASEAN
(+19.8%)
InCorp Global
.
Trade with emerging markets showed promising upticks: Middle East +14.9%, Latin
America +11.6%, Africa +5.8%
InCorp Global
.
3. Financial Hub & Investment Flows
Hong Kong continues to strengthen its role as an international financial center:
A surge in mainland Chinese capital flows via the Southbound Stock Connect has
bolstered liquidity and positioned Hong Kong as the world’s leading IPO market in
early 2025
Reuters
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It also reinforces its function as an offshore renminbi hub
Reuters
.
Foreign direct investment (FDI) reached record levels:
InvestHK supported 539 companies to establish or expand operations in 2024 (+41%
y-o-y), generating HK$67.7 billion and nearly 6,900 jobs
China Briefing
.
In 2023, FDI inflows were USD 112.6 B, making Hong Kong the 4th-largest FDI
recipient globally, with total FDI stock at USD 2.1 T
China Briefing
.
The city ranks highly in global competitiveness:
Ranked 5th in the World Competitiveness Yearbook 2024.
Tops in international trade and business legislation; among top five for tax
policy, investment, infrastructure, finance, and education
[Link]
.
4. Structural Challenges & Fiscal Measures
Property sector struggles:
Developers hit hard: Road King Infrastructure is poised to become the first to
default on a bond in Hong Kong since 2021
Reuters
.
HSBC reports 73% of its HK commercial real estate loan portfolio flagged as risky,
with high office vacancies (19%) and a 20%+ drop in prime rents
Financial Times
.
Fiscal pressures and government response:
A deficit of HK$87.2 billion due to plummeting land-sale revenues has compelled the
government to cut 10,000 civil service jobs by April 2027 and freeze salaries. It
aims to reduce public expenses by 7% by 2028 and invest HK$1 billion in AI R&D
Reuters
.
Additional stimulus includes a 100% cut in salary/business profits tax up to
HK$1,500, lifting the property transaction threshold, easing mortgages, and cuts to
liquor taxes
The Wall Street Journal
.
Bond issuance of HK$195 billion over five years is planned to fund infrastructure
and AI initiatives
AP News
.
Risks ahead:
Vulnerability to China’s economic slowdown, U.S.–China tensions, and potential
tariff escalations remain challenges
Reuters
Hong Kong Business
.
Retail and tourism still recovering: retail sales down 7.3% in 2024, inbound
tourism up 31% but still 31% below 2018 levels; per-tourist spend also dropped
Mastercard
[Link]
.
5. Summary Snapshot
Category Highlights
GDP Growth (Q2 2025) +3.1% y-o-y; modest full-year forecast (~2.2–2.3%)
Trade Exports growing, deficit persists; electronics dominate
Investment & Finance Strong FDI; IPO boom; Southbound inflows; fintech rising
Structural Issues Property slump, fiscal deficits, civil service cuts, AI
investment
Outlook Moderate growth; dependent on external demand and reforms
