Hong Kong-based Bank of China’s Head of Global Finance in Greater China, Li Guoji, stated that due to the improvement in local Gross Domestic Product (GDP) growth in the first quarter of Hong Kong this year, the annual growth rate is expected to be in the middle range of the government’s forecast of 2.5% to 3.5%. The bank has also revised its annual growth forecast from 2.5% to 2.9%.
Li Guoji pointed out that the expected economic growth in Hong Kong is projected to slow down to 2.3% in the second quarter, followed by a rebound to 3.3% in the second half of the year. While the stabilization of the mainland economy and government support measures for the property market and tourism industry are favorable for domestic demand prospects, close monitoring of various risks is still necessary, such as the impact of trade tariffs imposed by the United States and the European Union on export prospects.
In addition, based on the inflation trend from the beginning of the year, the bank has lowered its overall inflation rate forecast for Hong Kong in 2024 from 2.5% to 2%, while the government’s official forecast stands at 2.4%.
The bank stated that with market expectations of the Fed starting a rate-cutting cycle in September, the interest rate differential will turn into a discount, making the US dollar-Hong Kong dollar carry trade gradually less attractive, and the US dollar against the Hong Kong dollar may return to the middle range of 7.75 to 7.85. Overall, the bank has updated its forecast for the US dollar against the Hong Kong dollar to be at 7.8 for the upcoming four quarters starting from the third quarter of this year.