Asia > Eastern Asia > Hong Kong > Hong Kong Outlook for 2013-15

Hong Kong: Hong Kong Outlook for 2013-15


The country (Hong Kong) is situated in Eastern Asia, on the border of the South China Sea and China.
Chinese/Hong Kong land covers an area of 1092 km² which is times the size of Washington, DC
The climate is subtropical monsoon and cool and humid in winter and hot and rainy from spring through summer, warm and sunny in fall.
Chinese/Hong Konger speak Chinese (Cantonese), English; both are official.
China country profile, Travel advice for Hong Kong S.A.R., China

Leung Chun-ying was chosen as Hong Kong's chief executive in 2012 despite opposition from a lot of members of the territory's bureaucratic and business elites. Mr Leung has pledged to tackle growing social inequality and to provide additional low-cost housing, but his government will struggle to meet popular expectations. The pro-democracy camp will continue to criticise the chief executive on several fronts. Budget surpluses will be posted in 2013-17, with inflows from land sales boosting government revenue.
Despite weak increase in OECD markets, we estimate that Hong Kong's economic increase will reach 3.1% in 2013. Average annual economic increase will edge up to 3.3% in 2014-17, with stronger external request offsetting problems in the local housing market later in the estimate period. Inflation will be fairly rapid in the next five years, but the Hong Kong dollar's peg to the US dollar will be kept in place. The current account will move into deficit in 2017, largely owing to an increasing merchandise trade deficit.
Political outlook
In March senior Chinese government officials clarified that the mainland authorities intend to exercise control over the eligibility of candidates for Hong Kong's 2017 chief executive election. By clarifying that full and free democratic elections are not an option, they have removed an incentive for democrats in Hong Kong to co-operate with the electoral-reform process.
The government has taken a hands-off approach to a strike by hundreds of dock workers that threatens to damage the local port's reputation for efficiency.
The authorities are likely to adapt their traditionally tight fiscal policy in order to help to combat a likely economic slowdown in 2012. Spending targeted at supporting low-gain groups is likely to be ramped up.
Economic forecast
Following the release of balance-of-payments data for 2012 that reveal weaker than expected earnings from investments abroad, we have revised down our estimate for Hong Kong's gain balance. As a result, we instantly expect the current account to move into deficit by 2017.

Outlook for 2012-16 April 2013
  • Growing popular discontent with the government may pose a minor threat to political stability in 2013-17, and calls for the introduction of full democracy will grow louder. However, Leung Chun-ying, is expected to serve a full term.
  • Mr Leung has called for the government to provide additional low-cost housing. However, broadly speaking, his policies have not differed greatly from those of his predecessor, Donald Tsang.
  • Interest rates are not expected to be raised until 2015, owing to the Hong Kong dollar's peg to the US dollar (which is expected to remain in place in 2013-17). Annual consumer price inflation will average 3.9% in the estimate period.
  • In fiscal year 2013/14 (April-March), the government will maintain a relaxed fiscal stance in order to boost weak economic increase. However, substantial fiscal surpluses will continue to be recorded throughout the estimate period.
  • Real GDP increase will be respectable in 2013, at 3.2%. It will edge higher to an average annual rate of 3.3% in 2014-17, with stronger request increase in OECD markets offsetting the result of domestic property sector troubles.
  • Despite an expanding trade deficit, large surpluses on the services and gain accounts will enable Hong Kong to post average annual current-account surpluses equivalent to 6.2% of GDP in 2013-17.
Monthly review
  • The government announced in February that it expected a surplus of HK$64.9bn (US$8.4bn) to be recorded in 2012/13. In the budget for 2013/14 measures to support the economy worth HK$33bn were unveiled.
  • In February new measures were announced to cool soaring real estate prices, notably in non-residential parts of the property market, inclunding an increase in stamp duties on most real estate transactions.
  • Economic activity accelerated in the final quarter of 2012, with real year-on-year GDP increase hitting 2.5%. This took full-year economic increase to 1.4%. Private consumption was the major driver of increase in 2012.
  • Consumer price inflation slowed sharply in January, to 3% year on year from 3.8% in December, but the data were distorted by the timing of the Chinese New Year holidays.
  • Increase in merchandise exports and imports accelerated to 17.6% and 23.9%, respectively, year on year in January. However, increase rates are as well likely to have been boosted by effects linked to the timing of the Chinese New Year.
  • New passenger car registrations surged by 41.7% year on year in January. The strength of the rise indicates that this was not just a result of New Year effects.
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