Hong Kong Sees 2024 Growth Range at or Below Last Year

Hong Kong expects its economy to grow in a range of 2.5% to 3.5% this year, suggesting a potentially slower rate of expansion as the financial hub tries to bolster a struggling housing market and attract more tourism and investment.

(Bloomberg) -- Hong Kong expects its economy to grow in a range of 2.5% to 3.5% this year, suggesting a potentially slower rate of expansion as the financial hub tries to bolster a struggling housing market and attract more tourism and investment.

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Financial Secretary Paul Chan provided that forecast in his annual budget address on Wednesday. Analysts and economists have pointed to the likelihood that Chan’s speech will include the lowering of some rates on stamp duties to alleviate pressure on the city’s troubled real estate sector. Policies to entice more visitors have also been reported in local news outlets.

“Amid a complicated and ever-changing international environment, and with our economy and society constantly evolving, more strenuous efforts are required to strengthen momentum of our economic recovery,” Chan said.

The modest outlook for 2024 underscores challenges facing the city as it looks to lift growth. Economists surveyed by Bloomberg in December estimated that gross domestic product would expand 2.7% this year compared to 2023. The economy grew 3.2% last year.

Confidence in Hong Kong has waned as home prices tumble to a seven-year low, national security measures erode freedoms of expression and a stock rout makes it one of the world’s worst-performing equity markets. High interest rates and China’s growth slowdown have also weighed on the city’s recovery from the pandemic slump.

Another focus will be on the city’s fiscal position headed into the next year. Chan has limited capacity to tap into the budget to stimulate growth in the former British colony as the government seeks to rein in its deficit. While the economy expanded last year, the rate was slower than expected.

On Sunday, Chan wrote in a blog post that he planned to be more “focused and effective” in using limited public resources when facing a deficit. The city recorded a budget shortfall in three of the last four years as spending surged during the pandemic and revenue from land premiums fell.

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There are growing expectations of property easing in Chan’s budget speech. The city is set to remove some cooling measures to help revive its property market, the South China Morning Post reported late Tuesday, citing unidentified people.

“Developers could turn more active to sell their residential properties” after Chan’s speech, said Bloomberg Intelligence analyst Patrick Wong. “Their new home sales could increase in the coming months. Their share prices also rebounded recently — possibly due to the expectation of easing measures.”

Investors and analysts may also be on the lookout for more details on efforts to boost tourism. Hong Kong is heavily reliant on visitors from mainland China, and their spending is key to the health of the local retail and services sectors. Some 1.2 million mainlanders traveled to the city over the recent Lunar New Year holiday, down slightly compared to the equivalent period in 2019.

The city is set to allocate HK$971 million ($124 million) to tourism over the coming three financial years to attract more visitors, according to the SCMP.

The budget announcement coincides with the end of a weeklong visit by Beijing’s point person overseeing the semi-autonomous territory, and the final day of a consultation period for a new security law that has stirred anxiety among some in the business community.

Xia Baolong, the head of the Hong Kong and Macau Affairs Office, met with business representatives on Monday and vowed to uphold the “one country, two systems” governing formula for the city.

--With assistance from Shawna Kwan, Kiuyan Wong, Shirley Zhao, Felix Tam and Dominic Lau.

(Updates with GDP forecasts.)

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