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Explore Hong Kong's latest macroeconomic trends and forecasts to inform business strategy and pinpoint opportunities and risks

Hong Kong: Macroeconomic Country Outlook

GlobalData forecasts Hong Kong’s real GDP to grow by 0.7% in 2022
Hong Kong ranked eighth out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
According to GlobalData, Wholesale, retail trade and hotels gross value added to expand by 5.1% in 2022

Hong Kong has a well-developed and regulated banking sector. According to Z/Yen in collaboration with China Development Institute, Global Financial Centres Index 31 (March 2022), Hong Kong was ranked third out of 126 main financial centres of the world. Hong Kong’s banking sector has a strong liquidity and capital base. According to the Hong Kong Monetary Authority, Annual Report (2020), 161 licensed banks, 17 restricted license banks, and 12 deposit taking companies are functioning in Hong Kong. The loan-to-deposit ratio stood at 72.3% in 2020, compared to 73% in 2017. Total assets of banks amounted to HK$25.9 trillion ($3.3 trillion) in 2020, compared to HK$22.7 trillion ($2.9 trillion) in 2017. The Common Equity tier 1 capital ratio stood at 18.7% in 2020, compared to 18.5% in 2019, which is well above the stipulated Basel III capital adequacy requirements.

Key findings

Typhoons in Hong Kong: In Hong Kong, typhoons occur roughly six times a year on average. New Territories is the area that has been most severely affected. The Pacific typhoon season typically starts in April with fewer intense storms and lasts until November. August and September are often the months with most destructive typhoons. The strongest typhoon to hit Hong Kong in the previous 12 months was a 34-kilometer-diameter storm that made landfall on August 4, 2022. This was classified as a tropical depression typhoon, according to the internationally accepted Saffir-Simpson classification. In July 2022, shipping services of the country witnessed a blip in supply chain caused by Typhoon Chaba. The storm weakened into a tropical depression. In the area where it touched onshore, the storm caused catastrophic floods and interrupted ships, railroads, and civil aviation.
The country has a high human development ranking: Hong Kong has performed impressively on various parameters of the UNDP’s Human Development Index (2020). Hong Kong was ranked fourth out of 189 nations with a score of 0.949 out of one in 2020, compared to the world average score of 0.722. Hong Kong has performed well in terms of female social development. According to the UNDP, Gender Development Index (2020), in 2019, Hong Kong secured a score of 0.933, which is high as compared to 0.731 of East Asia and the Pacific.
Hong Kong ranked third out of 190 countries, according to the World Bank, Doing Business Report (2020): Hong Kong’s score (85.3 out of 100) is ahead of other peer nations such as Japan (78) and China (77.9), and the regional average (83.9) in the 2020 doing business report. It takes two procedures to start a business in Hong Kong as compared to the East Asia and Pacific average of 6.5 procedures. The city was ranked first in the parameter of dealing with construction permits with eight procedures, fewer than the East Asia and Pacific average of 14.8.
Hong Kong exodus to impact labour market: Many families in Hong Kong are moving to countries like the UK, Canada and other countries in pursuit of more freedom since introduction of National Security Law by China, spurring more people to leave. Around 113,200 residents left Hong Kong in 2021, compared to 89,200 the previous year. According to the Immigration Department, during H1 2022, only 5,701 visas were approved for international workers in Hong Kong under the General Employment Policy as compared to 20,314 in H1 2018. Moreover, work visas in the country decreased from 62,155 in 2017 to 32,248 in 2021. The pressure of younger workers wanting to emigrate is likely to continue in the country.
Hong Kong’s FDI regime: According to the UNCTAD, World Investment Report (2022), Hong Kong received $140.7 billion FDI inflows in 2021, placing third position globally after the US ($367.4 billion) and Mainland China ($181.0 billion). With $87.5 billion in FDI outflows, Hong Kong was ranked seventh globally. Hong Kong ranked as the world's fifth-largest host in terms of FDI stock in 2021 with $2 trillion. At the end of 2021, Hong Kong's stock market had a market capitalization of $5.4 trillion, making it the seventh largest in the world and fourth largest in Asia. With $42.3 billion collected through IPO in 2021, Hong Kong is also the fourth-largest IPO fundraising market in the world.
Budget 2022 loan guarantee for enterprises: According to the Budget 2022, the government has increased the loan ceiling to $9 million, maximum loan amount to 27 months' worth of employee wages and rent, and maximum repayment term to 10 years. The government has given customers the choice to make partial repayment of principal over a longer period of time. The business registration fee is waived for 2022–23. For eight months, the government continued to exempt 75% of water and sewage fees that non-domestic families must pay, with a monthly cap of $20,000 and $12,500, respectively. For the next six months, the government continues to offer qualifying government tenants and short-term tenants rental and fee concessions of 75% (with 100% concession for closures at the government's request).

Key fundamentals

Sectoral outlook

Tourism industry to rebound gradually: According to the Tourism Board, Hong Kong's tourism industry would strongly rebound in 2022 by attracting visitors. According to the World Economic Forum, Travel and Tourism Development Index (2021), the country was ranked 19th out of 117 nations. According to the World Travel and Tourism council, travel and tourism contributed 3.2% to GDP and the sector created 439 thousand jobs, which is equivalent to 12% of total jobs in 2021. According to GlobalData, international arrivals to the country recorded 1.4 million in 2020 and 85.9 thousand in 2021, caused by the second wave in the country, and strict lockdown and travel restriction measures to curb the spread of disease. Further, international arrivals to the country is forecast to reach 16.2 million in 2022 and 19.5 million in 2023.
Hong Kong to invest in renewable energy: The Hong Kong government in a bid to mitigate the climate crisis has set aside HKD3 billion ($0.4 billion) for small-scale renewable energy installations in government buildings, events, and community facilities. It is also actively investigating large-scale renewable energy projects, including floating PV systems at impounding reservoirs and photovoltaic systems at appropriate landfills. To promote green transport, the HKSAR Government will implement measures outlined in the EV Roadmap and the CAP 2035, such as the creation of a green transportation network, implementation of environmentally friendly transportation modes in new development areas, and promotion of the use of new energy ferries. In April 2022, Hong Kong's environment authorities stated that they will lower the buy-back rate for people selling renewable energy to the city's two power providers under the government's feed-in tariff scheme. According to the World Wildlife Fund (WWF), Hong Kong will be able to achieve its 100% renewable energy target by 2050.
Growth of construction sector is expected to pick up: According to the Census and Statistics Department, as of March 11, 2022, the total gross value of construction works (GVCW) completed by primary contractors in Hong Kong grew in nominal terms by 0.7%. The GVCW performed by main contractors is expected to decrease further and significantly in the first quarter of 2022, as the city has been battling the fifth wave of COVID-19. The industry has been impacted by some of the most stringent public health measures imposed by the Hong Kong Government since the start of pandemic. Construction and activities have resumed as these measures have begun to soften. Since April 2022, the government has pledged new public work projects and reiterated its commitment to key mega-sized development projects in its latest Budget. According to GlobalData, the construction sector of the country grew by 5.6% in 2021 and is forecast to expand by 6.4% in 2022.

GlobalData Country Risk Index (GCRI) – Q2 2022

Hong Kong ranked eighth out of 152 nations in the GCRI Q2 2022. The country’s score is in the very low-risk nations band (below 30). Hong Kong’s overall risk score is lower than the Asia-Pacific and the world average in GCRI Q2 2022 on all parameters, including macroeconomic risks, political environment, legal environment, demographic and social structure and technology and infrastructure. Hong Kong’s overall score decreased from 22.4 in Q1 2022 to 22.2 in the Q2 2022 GCRI update.

GCRI Methodology

GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.

The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia Pacific nations in this publication include China, Hong Kong, Thailand, Indonesia, Singapore, Australia, Vietnam, the Philippines, and New Zealand.

About the report

GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.

More details: Macroeconomic Outlook Report: Hong Kong

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