Hong Kong’s economy to rebound by 4% in 2023

Hong Kong, March 30  International rating agency Fitch on Thursday predicted that Hong Kong’s economy will rebound by 4 per cent this year, following a contraction of 3.5 per cent in 2022.

Removal of most pandemic-related restrictions has led to visible improvements in business activity and cross-border connectivity since early 2023, the firm said, adding that “we believe the economic recovery will endure well into next year”, reports Xinhua news agency

Fitch forecasts growth of 3.5 per cent in 2024, modestly above the pre-pandemic trend of around 3 per cent.

Calling the region’s credit fundamentals strong, Fitch affirmed Hong Kong’s long-term foreign-currency issuer default rating at “AA-” with a stable outlook.

Hong Kong’s ratings are supported by large fiscal buffers, robust external finances and high per capita income, Fitch said in a commentary about its rating action.

The ratings also reflect the closer alignment of governance and institutional management practices with the Chinese mainland, trends that have advanced steadily since 2019, said the agency.

In terms of currency stability, Fitch said it sees low risk to Hong Kong’s linked exchange rate system with the US dollar.

The agency said Hong Kong’s foreign exchange reserves totaled $429 billion as of February end, equivalent to roughly 1.8 times the region’s monetary base and 119 per cent of the gross domestic product (GDP).

Hong Kong banks benefit from healthy liquidity buffers, strong capitalisation and stable funding, Fitch said, noting that “we believe these factors will make the sector more resilient to deposit flight and the loss in market confidence”.

The sector’s capital adequacy ratio stood at 20.1 per cent at end-2022, near the top end of banking systems in the Asia-Pacific region, said the agency.