As inflation rises globally, Hong Kong must remain alert
While the city is better off than most amid the effects of the war in Iran, events in the Middle East can be unpredictable
The bombing might have slowed in the Middle East, but the ongoing conflict has led to the closure of the Strait of Hormuz – a major energy supply route – and the dropping of inflation bombs, driving up energy and commodity costs worldwide. The cost of living is rising in most countries, but it’s especially bad for low-income and developing nations where fuel and food supplies are disrupted.
The worldwide inflation has also affected China primarily through increasing import costs and global supply chain disruptions. However, the effects have been relatively contained.
There are two main reasons for that. The service sectors are the primary driver of our economy, generating about 90 per cent of gross domestic product. As a result, we are far less energy-dependent than manufacturing-based economies in Asia. Secondly, mainland China is providing stable energy supplies, thus tempering volatile and high prices elsewhere.
But while we are in an advantageous position, we cannot let our guard down. Being shielded from the worst does not mean the surge in global fuel prices hasn’t affected fuel-related consumer prices and therefore inflation. The government has revised upwards its 2026 forecasts for underlying and headline consumer price inflation from 1.7 per cent and 1.8 per cent to 2.5 per cent and 2.6 per cent, respectively.