Editorial | Hong Kong’s famed resilience can help overcome economic challenges
With sluggish growth, consumption woes, a yawning deficit, Trump tariffs and a budget looming, Hong Kong must go all out to reverse its fortunes
Hong Kong’s economy has lumbered in to close 2024 with 2.5 per cent growth, down from 3.2 per cent the previous year, but at least still on the lower cusp of forecasts. While the government has predicted growth for the coming year and the Lunar New Year tourist crowds have been sizeable, there remains cause for concern ahead of the budget later this month.
For a taste of the challenges, look no further than retail sales, which declined for a 10th consecutive month at the year’s end. Sales in December came in 9.7 per cent lower than the corresponding month in 2023. Take to any street and the evidence of lingering sluggish consumption bears this out with empty shops and rental adverts. A retail industry association survey found that 60 per cent of businesses expect declining sales in the first two months of this year.
Fuelling local consumption remains a challenge. The persistent trend of Hongkongers heading north to shop, dine, be entertained and take advantage of a weaker yuan has not helped. Mainland and overseas visitors thronged the city during Lunar New Year, with 680,000 seeing the sights from Tuesday of last week to Friday, up 6 per cent on 2024. Hotels reported 90 per cent occupancy, but the trend among visitors of shorter stays and frugal spending persists.
Hongkongers, meanwhile, made 1.8 million trips out of the city in the five days around Lunar New Year, up 8.6 per cent on the previous year. Thankfully, the restaurant federation reported a 10 per cent increase in business despite the exodus.
The geopolitical environment brings added pressure. US President Donald Trump is brandishing trade tariffs as a weapon to exact concessions from allies and rivals alike. Hong Kong authorities have warned Trump’s inflationary policies may disrupt global trade flows, adversely affect exports, hurt local business and prolong the high interest rate environment that has discouraged property buying. A stronger US dollar, to which the local currency is pegged, may also deter tourists.
The city is already closing the financial year trying to make up a HK$100 billion deficit that stems from land sales, stamp duties and corporate tax revenues that failed to meet expectations. When Financial Secretary Paul Chan Mo-po unveils his latest budget on February 26, his plans on how to pare back the deficit and to stimulate growth will be closely scrutinised.
