Hong Kong to post slower growth rate in 2015

Housing market, a key sector to the Hong Kong economy, shows signs of resilience despite a number of prudential measures put in place by the HKMA. Year-to-date, the property market price index climbed to 18.4% y/y, accompanied by stabilisation in transaction volumes. The Secretary of Development of Honk Kong warned homebuyers to pay close attention to market conditions and assess affordability amid a considerable increase in future supply and volatility in the global economy. 

"We believe the two major headwinds - the slowdown of mainland China's growth and expected Fed rate hike in the near term - continue to hold with a cooling housing market weighing on growth and investment in the medium term. As a result, we revised down our 2015 GDP forecast to 1.8% from 2.3% due to the continued decline in retail sales and a weaker-than-expected growth outlook for Hong Kong's major trading partners, in particular China", argues Barclays. 

Hong Kong's private sector may contract in the near term as new business from mainland China placed at Hong Kong's private sector firms dropped at the sharpest rate since late 2008. To support growth, there is believed to be room for more accommodative fiscal policy to promote investment including infrastructure.