Hong Kong is likely to experience mod est real GDP growth through 2017 , and we maintain our forecast for real GDP growth to come in at 1.2% in 2016 and 1.7% in 2017. Trade activity and private consumption in the Special Administrative Region will be undermined by China-related headwinds, coupled with weakness in the domestic real estate market.
Hong Kong's September 4 Legislative Council elections saw the opposition pro-democracy alliance gain ground against the ruling pro-Beijing camp, with a group of young politicians gaining seats amid displeasure over the government's failure in pushing for universal suffrage in the territory. However, we see limited prospects for significant change in the city-state's political environment as Beijing is unlikely to yield on its existing position. Meanwhile, Beijing's grip on the city-state will continue to strengthen over the coming years as the Xi administration maintains a politically conservative line. This will likely entail a further widening of the gulf between the electorate and the government, which could have implications on Hong Kong's long-term social stability outlook.
The potential for a financial or economic crisis in China continues to be by far the biggest risk factor for Hong Kong. Such a crisis would hit Hong Kong hard given its deep trade and financial linkages to the mainland, and the high proportion that financial and trade services comprise of Hong Kong's economy.
|f= BMI forecast. Source: BMI, Census and Statistics Department|
|Real GDP growth, % y-o-y||2.7||2.4||1.2||1.7|
|Nominal GDP, USDbn||291.2||298.4||307.9||320.3|
|Consumer price inflation, % y-o-y, eop||4.9||2.4||2.0||2.5|
|Exchange rate HKD/USD, eop||7.76||7.75||7.77||7.77|
|Budget balance, % of GDP||3.3||1.3||1.2||1.3|
|Current account balance, % of GDP||1.8||3.0||2.8||2.3|
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