Hong Kong's economic growth forecast for 2025 has been downgraded to 1.5% due to the impact of the US-China tariff war and geopolitical tensions.

Taiwan • Business • 04/24 07:04
Hong Kong's economic growth forecast for 2025 has been downgraded to 1.5% due to the impact of the US-China tariff war and geopolitical tensions.

In 2025, financial institutions such as HSBC, OCBC, and Shanghai Commercial Bank lowered Hong Kong's economic growth forecast to between 1.5% and 1.9%, mainly due to the impact of the US-China tariff war and rising geopolitical risks affecting exports and fixed investments. As an international re-export trade hub, Hong Kong faces economic pressure from intensifying global trade tensions. Some institutions, like DBS Hong Kong and Bank of East Asia, are taking a wait-and-see approach, waiting for more data to determine whether to adjust their forecasts.

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04/24 07:04

Hong Kong's economic growth forecast for 2025 has been downgraded to 1.5% due to the impact of the US-China tariff war and geopolitical tensions.

In 2025, financial institutions such as HSBC, OCBC, and Shanghai Commercial Bank lowered Hong Kong's economic growth forecast to between 1.5% and 1.9%, mainly due to the impact of the US-China tariff war and rising geopolitical risks affecting exports and fixed investments. As an international re-export trade hub, Hong Kong faces economic pressure from intensifying global trade tensions. Some institutions, like DBS Hong Kong and Bank of East Asia, are taking a wait-and-see approach, waiting for more data to determine whether to adjust their forecasts.

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Multiple Banks Simultaneously Lower Forecasts

In late April 2025, HSBC Global Research released a report lowering its GDP growth forecasts for Hong Kong in both 2025 and 2026 to approximately 1.5%. This represents a decrease of 0.5 percentage points for 2025 and 0.3 percentage points for 2026 from the bank's forecast at the end of 2024. The report indicates that the recent escalation in US-China trade tensions and heightened geopolitical tensions are the main reasons for the downward revision.

OCBC Bank also adjusted its forecast, lowering Hong Kong's economic growth expectation for 2025 from the original 2.2% to 1.9%, and for 2026 from 2.5% to 2.3%. The bank's Hong Kong economist, Jiang Jing, pointed out that the US and China imposing tariffs on each other have severely disrupted bilateral trade, which is expected to have a significant impact on global trade volumes. She further stated that as a re-export trade center, Hong Kong's export value is expected to decline by 10% annually, exerting direct pressure on the economy.

Lin Junhong, head of research at Shanghai Commercial Bank, stated that the bank has lowered its 2025 Hong Kong GDP growth forecast from 2% to 1.5%. He noted that the latest US tariff policies will weaken the cost advantage of Chinese suppliers, thereby affecting Hong Kong's net export performance. Additionally, reduced business confidence may also result in delays in local fixed investment, further dragging down economic growth.

Tariff War and Geopolitical Risks as Main Causes

Multiple institutions have unanimously pointed out that the US-China tariff war is the primary factor leading to the downward revision of Hong Kong's economic forecast. According to OCBC Bank's analysis, China holds a significant position in global trade, and when the US and China impose tariffs on each other, global supply chains and trade flows will be severely disrupted. As an intermediary in trade between China and the world, Hong Kong's re-export business is the first to be impacted.

Lin Junhong further pointed out that as Chinese suppliers' competitiveness in the US market declines, Hong Kong's re-export trade will face structural challenges. Moreover, geopolitical uncertainties have also intensified businesses' wait-and-see attitude towards future investments, affecting the formation of local fixed capital.

HSBC's report also mentioned that heightened geopolitical risks pose pressure on Hong Kong's financial markets and capital flows. The report noted that the Hong Kong dollar might briefly touch the strong-side convertibility undertaking level of 7.75, reflecting market concerns about liquidity. The aggregate balance of the Hong Kong banking system has fallen to less than HKD 45 billion, a recent low, indicating tightening financial conditions.

Other Institutions' Wait-and-See Attitude

Despite multiple banks having lowered their forecasts, some institutions are adopting a wait-and-see approach. DBS Hong Kong's senior economist, Chow Hung-lai, stated that the bank's original forecast for Hong Kong's economic growth in 2025 was 2.5%, and they are currently waiting for the release of first-quarter data before making a decision. He pointed out that US-China trade accounts for only 5% to 6% of Hong Kong's total trade, so the direct impact is limited, but if the tariff dispute expands to other areas, the risk will increase.

East Asia Bank's chief economist, Choi Wing-hung, stated that the bank is temporarily maintaining its 2.5% growth forecast for 2025 but acknowledged that the external environment is changing rapidly, and the uncertainty of tariff policies is high, which may require future revisions.

Economic Indicators and Official Observations

According to the HSBC report, Hong Kong's loan-to-deposit ratio further declined to 73.5% in February 2025, the lowest level since the global financial crisis, reflecting weak loan demand and liquidity pressure. Additionally, the report noted that while Hong Kong dollar deposits continue to grow, loan issuance continues to shrink, indicating a lack of confidence among businesses and consumers.

In terms of exports, OCBC Bank expects Hong Kong's export value to decline by 10% year-on-year in 2025, a figure that is closely tied to Hong Kong's role as a re-export trade center. The trade shifts and supply chain restructuring caused by the escalation of US-China tariffs pose challenges to Hong Kong's logistics, warehousing, and financial services industries.

References

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