Hong Kong exposed to shortage of property, ageing population and economic slowdown on the mainland, says IMF
With a large globally integrated financial sector and a currency board arrangement, the economy is particularly exposed to US development, IMF study highlights
The International Monetary Fund (IMF) has issued a warning on Hong Kong’s economic outlook, highlighting a shortage of housing, an overheating property market, an ageing population and an economic slowdown on the mainland.
The report, released on Friday, offers a more detailed analysis on Hong Kong’s economic and financial positioning, and follows the issue of a brief summary report on December 7.
The new study is based on IMF staff visits to the city in October and November to various private and public organisations in the city.
Hong Kong is effectively facing three major risks, the report said.
“Growing economic linkages mean that changes in mainland China’s growth prospects spill over to Hong Kong Special Administration Region’s financial and real sectors,” it said.
“With a large globally integrated financial sector and a currency board arrangement, the economy is exposed to US developments and global market volatility. The property market is also a source of downside risk.”
The IMF said, however, it was confident the government has measures in place to handle the “renewed signs of overheating in the property market” by boosting housing supply and by introducing stamp duties to contain speculative activity and external demand.
“Stamp duties can be an effective part of the toolkit to stem excessive price increases and speculation in the real estate market,” it added,
“As the distorting costs of duties become more significant the higher they are, they should be rolled back once the trend has shifted towards reduced prices and speculative pressures.”
The IMF document said the Hong Kong government has a good fiscal policy that provides strong buffers to make sure these challenges and risks are manageable, while the pegging system between the Hong Kong and US dollars also maintained financial stability.
It underlined, too, that the city is faced with an ageing population, and says the government needs to have robust fiscal policies in place that “strike a balance between supporting aggregate demand and preserving a buffer for the longer-term challenges posed by ageing”.
“Measures to broaden the tax base may also be needed.”
Acting Financial Secretary Chan Ka-keung welcomed the study.
“With strong economic fundamentals and a robust financial system, Hong Kong is well positioned to tackle the challenges ahead.
“We will continue with efforts to strengthen Hong Kong’s status as an international financial centre, capitalising on our competitive advantages and close economic ties with the mainland,” Chan said in a statement.
Hong Kong Monetary Authority chief executive Norman Chan also highlighted the positive comments made in the IMF report to Hong Kong’s peg linked system.