HSBC Global Investment Research released a Hong Kong economic report, raising its Hong Kong GDP growth forecasts for 2026 and 2027 from 2.7% and 2.8% to 3.8% and 3%, respectively. The bank has turned more optimistic on Hong Kongs growth outlook after 1Q26 GDP growth reached 5.9%, close to a five-year peak, coupled with the relatively limited direct impact from the Middle East conflict and signs of consolidating domestic momentum.

The bank noted that Hong Kongs economic structure is service-led. Although nearly all energy is imported, a substantial portion comes from mainland China, with only a limited share sourced from the Middle East. The government has also introduced direct support measures, including fuel subsidies and tunnel toll concessions, to help mitigate part of the impact. In addition, amid heightened uncertainty, Hong Kongs role as a safe haven may attract capital inflows seeking stability.

Furthermore, booming demand driven by AI, together with a recovery in trade related to mainland China, is likely to serve as a key buffer for trade this year. However, if the impact of the Middle East conflict persists and dampens global demand, downside risks would emerge.

On the domestic front, as the residential property market continues to recover, generating positive wealth effects, and with improvements in the labour market, consumption has shown signs of improvement. The bank expects consumption this year to shift toward more discretionary goods and services. The accelerated implementation of major government projects, such as the Northern Metropolis, alongside AI-driven demand, will support investment activity. Fiscal support through infrastructure bonds and a relatively favourable monetary environment should also help sustain investment momentum. (ss/da)

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