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Hong Kong may have to gear up for “a lot of volatility” in 2024, Hong Kong’s financial secretary Paul Chan told CNBC.
Next year will be “full of external challenges,” Chan told CNBC’s Emily Tan. “Interest rates [are] going to be higher for longer, geopolitical tensions will continue. And there will also be elections in the U.S. So there could be a lot of volatility,” he said.
Hong Kong is a special administrative region of China, and like the mainland, has faced a disappointing post-Covid economic recovery. Beijing has tapped fiscal stimulus to shore up economic recovery and contain its spiraling debt crisis among the country’s property developers.
Chan is upbeat about China’s recovery.
He said he believes the world’s second-largest economy is set to “grow steadily in the pursuit of high quality development.”
As Hong Kong’s economy is closely connected to the mainland’s, it will give Hong Kong “strong backing and optimism” and lend the city the economic boost it needs.
China has set itself a growth target of around 5% for 2023. According to the International Monetary Fund latest assessment in November, China’s economy is projected to post a growth of 5.4% in 2023. However, this growth is also expected to slow to 4.6% in 2024 due to property market weakness, the IMF said.
Moody’s downgrade not a fair one
Moody’s downgraded its outlook on China’s government credit ratings to negative on Tuesday.
On Thursday, the credit ratings agency trimmed its outlook on Hong Kong — a move which Chan said was not fair.
“I don’t think it is a fair downgrade of our economic outlook,” Chan said. “We have already moved from the bottom and [are starting] to improve strongly.”
He maintained that Hong Kong had a “very strong and very resilient” economic growth of about 3.2%.
The finance secretary said the main pillars of Hong Kong’s growth are services exports, capital investments, and consumption.
Hong Kong’s exports of services for the third quarter drew in 193.6 million Hong Kong dollars ($24.8 million), marking a year-on-year jump of 16%. The city also recorded a 4.1% growth in the third quarter compared to a year ago.
The IMF expects Hong Kong to post a 4.4% growth in real GDP.
