Asia Regional Integration Center

The economy posted 3.8% growth in 2017 backed by strong external and domestic demand. With the recovery of inbound tourism and healthy private spending, the economy is expected to sustain growth in 2018. Inflation will rise on higher global prices, and the current account surplus will narrow slightly on stronger imports. Services will continue to be the main growth driver, particularly financial services and retail. The development of the Guangdong-Hong Kong-Macao Bay Area, a global industrial, commercial and financial cluster, will bring in more investment opportunities. The economy is likely to grow by 3.7% in 2018 supported by strong domestic demand due to high government spending, buoyant property market, and rising wages.

Slower growth in demand from the PRC and uncertain global trade conditions are downside risks. However, an abrupt monetary tightening of the US can potentially cause a sharp correction in the property market, which is already a domestic risk due to sky-high prices. The economy is well-positioned to weather these challenges given its sizeable external reserves and ample fiscal reserves of the economy.