International Monetary Fund cuts Hong Kong growth forecast
The Washington-based body says the city will grow 2.2 per cent this year, above the financial secretary’s forecast of 1 to 2 per cent
The International Monetary Fund has cut its forecast for Hong Kong’s economic growth to 2.2 per cent this year. However, it was still above Financial Secretary John Tsang Chun-wah’s projection of 1 to 2 per cent growth announced in this year’s budget.
The IMF’s latest forecast is a 0.5 percentage point cut from the projection it made in October last year.
This came after rating organisation Moody’s downgraded its outlook for Hong Kong from stable to negative to reflect the city’s tightening political, economic and financial linkages to mainland China.
Asked about recent political tensions between the two sides and whether they would affect the city’s economic future, Changyong Rhee, director at IMF’s Asia and Pacific Department, said Hong Kong had “benefited from one country, two systems” and that he hoped “it could continue”.
Ranil Salgado, division chief of regional studies at the IMF department, said the city’s GDP growth downgrade stemmed more from the global economy’s overall sluggish environment rather than its close linkage to China.
“We do see some bumpiness from China’s economic transition,” said Salgado. “But more than that, it really is the overall sluggishness of the global economy, which seems to be affecting more advanced Asian economies including Hong Kong’s.”
“We do believe it will support short-term growth in China,” he added. But he expected China’s positive influence to start manifesting in 2019.
Rhee added the Chinese economy’s recent recovery at the start of the year “seemed to continue” in the second quarter.
He said Hong Kong, as a small and open economy, served as a regional financial centre and that this had made it more sensitive to external economic factors.
In contrast, the IMF upgraded the mainland’s GDP forecast, revising its economic growth estimate this year from 6.3 per cent to 6.5 per cent on Beijing’s recent policy stimulus which included expending further credits.
Despite the cut, the IMF said it was still bullish on Hong Kong, as it forecast the city’s GDP growth in 2017 to pick up, expanding at 2.4 per cent.
“Hong Kong by and large remains in a very strong position,” said Sally Chen, a local IMF representative. “It has very strong buffer for its financial and banking system.”
In its regional survey, the IMF said the headwinds from higher interest rates and slower mainland growth were expected to continue to have an impact on the city’s already battered tourism and retail sectors in the coming year.
The survey highlighted the city’s close links with the mainland, in which it said Hong Kong might easily suffer a financial spillover from China.
“Economies most sensitive to further volatility in Chinese markets are those with strong trade links with China,” the group said.
