Following its 2024 Article IV Consultation with the Hong Kong Special Administrative Region (HKSAR), the International Monetary Fund (IMF) has recognized Hong Kong’s strong standing as an international financial center and endorsed its pathway towards fiscal consolidation.
This affirmation came via a concluding statement released on January 10 by the IMF Staff Mission, which highlighted the resilience of Hong Kong’s financial system amidst various economic challenges.
The IMF’s review underscored Hong Kong’s robust institutional frameworks and the effectiveness of its Linked Exchange Rate System (LERS), which have collectively supported the territory’s financial stability.
According to the IMF, these factors provide substantial policy buffers and contribute to the smooth operation of financial activities in Hong Kong.
The IMF report further noted the appropriateness of the HKSAR Government’s medium-term fiscal consolidation strategy, considering the prevailing economic conditions.
The organization anticipates a reduction in fiscal deficits, bolstered by new revenue measures, stringent expenditure control, and the tapering of pandemic-related spending.
The assessment projects that Hong Kong’s real Gross Domestic Product (GDP) will grow by 2.7 percent annually in 2024 and 2025.
The IMF also commended the HKSAR Government for its efforts to cultivate new economic growth avenues, such as the Guangdong-Hong Kong-Macao Greater Bay Area initiative and its strategy to attract foreign talent and investment in high-value sectors.
Additionally, the report highlighted the financial health of locally incorporated banks, noting their strong capitalization, liquidity, and profitability. Low domestic mortgage delinquencies and high household credit quality, supported by a stable employment landscape, were also points of praise.
The IMF welcomed the Hong Kong Monetary Authority’s (HKMA) introduction of a positive-neutral Counter-Cyclical Capital Buffer (CCyB) rate, which is expected to bolster the banking sector’s ability to support lending amid emerging systemic risks.
The IMF also recognized significant progress in developing a green and sustainable finance landscape in Hong Kong, suggesting that advancements in this area could further enhance its competitiveness as a global financial hub.
The IMF’s full report, which includes these observations and recommendations, is set to be discussed by its Executive Board in this month.