Notably, weak private investment and declining labour force participation are both still below pre-pandemic levels, IMF said after concluding its Article IV Consultation for Hong Kong.
The banking system remains resilient, underpinned by strong capital, ample liquidity and solid profitability, although asset quality pressures persist in some segments, particularly domestic commercial real estate exposures, which represent the principal near-term financial risk, IMF noted.
Despite Hong Kong further reinforcing its role as a global financial centre, the recovery is incomplete: economic activity is below its pre-pandemic trend, while headwinds persist, the IMF said.
Weak private investment and declining labour force participation are still below pre-pandemic levels.
Near-term growth is likely to moderate, reflecting weaker external demand and tighter financial conditions.
Near-term growth is expected to moderate, reflecting weaker external demand and tighter financial conditions amid the war in the Middle East.
Over the medium term, declining youth labour force participation and population aging are expected to weigh on labour supply and potential growth, projected at around 2.25 per cent.
The outlook is subject to downside risks, given Hong Kong’s high exposure to geopolitical and trade tensions, global financial volatility and a potential slowdown in the technology cycle.
Financial sector risks appear manageable, supported by strong buffers and robust regulatory oversight, but continued vigilance is warranted, IMF added.
Fibre2Fashion News Desk (DS)