Hong Kong Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Hong Kong Country Risk Report
Product Price
$1,195.00

Hong Kong

Core Views

  • Hong Kong's slightly underperformed our forecast for 2015, achieving real GDP growth of 2.4% versus our expectations for a 2.5% expansion. We expect 2016 to be a more difficult year in the territory as a more acute downturn in mainland China and a deepening domestic property price correction act as stout headwinds, and we have downgraded our real GDP forecast for the year to 1.7% from 2.3% previously.

  • In line with our expectations, a correction has taken hold in the Hong Kong residential property market. Price declines are set to continue in 2016 as supply constraints fade and interest rates rise. At the same time, affordability is extremely stretched relative to median household incomes, and we believe that the confluence of these factors spell a difficult outlook for the property sector over the coming years. This will hit both construction activity as well as the financial services sector in the territory.

  • Hong Kong's quadrennial legislative elections in September are unlikely to produce a significantly different government than the one currently in power in the city-state, as the failure to achieve universal suffrage has left intact a hybrid-electoral system that favours the pro-Beijing camp. 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.

Key Risks

  • 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. We also continue to see a tail risk of a Hong Kong dollar devaluation (taking the form of an adjustment to the currency's peg versus the US dollar) in the event that volatility in the Chinese yuan ramps up again. Hong Kong's increasingly deep ties with the mainland could make it difficult for policymakers to maintain the peg versus the US dollar should the CNY experience an acute sell-off, thereby putting downwards pressure on the decades-old peg.

Macroeconomic Forecasts (Hong Kong 2014-2017)
Indicator 2014 2015e 2016f 2017f
BMI/Census and Statistics Department
Nominal GDP, USDbn 290.9 308.9 320.3 334.7
Real GDP growth, % y-o-y 2.5 2.4 1.7 2.2
Consumer price inflation, % y-o-y, eop 4.9 2.4 2.0 2.5
Exchange rate HKD/USD, eop 7.75 7.75 7.77 7.77
Budget balance, % of GDP 3.3 2.7 2.5 2.4
Current account balance, % of GDP 1.8 2.9 2.7 2.1
Executive Summary
5
Core Views
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
Tepid Growth Outlook Following Q315 Slowdown
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
9
TABLE: PRIVATE CONSUMPTION FORECASTS
9
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
10
Fiscal Policy And Public Debt Outlook
10
Revenue-Boosting Measures Set To Stem Structural Headwinds
10
Structural Fiscal Position
11
External Trade And Investment Outlook
12
Global Trade Woes Paint Mediocre Growth Picture
12
Outlook On External Position
13
TABLE: TOP FIVE GOODS EXPORT DESTINATIONS (2015)
14
TABLE: TOP FIVE GOODS IMPORT SOURCES (2015)
14
Monetary Policy
15
HKMA To Stand Pat As Property Prices Hit Inflection Point
15
Monetary Policy Framework
17
Chapter 2: 10-Year Forecast
19
The Hong Kong Economy To 2025
19
Integration With Mainland Key To Growth
19
TABLE: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 3: Political Outlook
21
SWOT Analysis
21
BMI Political Risk Index
21
Domestic Politics
22
2016 Elections Unlikely To Yield Significant Change
22
TABLE: POLITICAL OVERVIEW
22
Long-Term Political Outlook
23
Benign Outlook Despite Democratic Reform Difficulties
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
TABLE: OPERATIONAL RISK
28
Trade Procedures And Governance
29
TABLE: EXPORT & IMPORT DOCUMENTS
29
TABLE: TRADE PROCEDURES BREAKDOWN
29
Vulnerability To Crime
30
TABLE: ASIA - TRADE PROCEDURES AND GOVERNANCE RISK
30
Chapter 5: BMI Global Macro Outlook
35
Global Macro Outlook
35
Unfinished Business In 2016
35
TABLE: GLOBAL ASSUMPTIONS
35
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
36
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
36
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
37
TABLE: HONG KONG - MACROECONOMIC DATA & FORECASTS
39

Assess your risk exposure in Hong Kong with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Hong Kong with confidence.

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