Hang Seng Bank upgrades Hong Kong growth forecast to 3.1% in 2026

This will be underpinned by strong domestic and external growth.

Hong Kong’s economic growth is projected at 3.1% in 2026, up from an earlier forecast of 2.5%, according to the Hong Kong Economic Monitor published by Hang Seng Bank.

This will be driven by favorable domestic and external conditions seen supporting a stronger growth trajectory, the bank noted. 

It also expects gains in asset markets to boost consumer sentiment and sustain growth in demand, following "significant improvement" in the retail sector in 2025. 

"This uptick in consumption likely reflects the positive wealth effect from stronger asset market performance, particularly in both the equity and property markets," the bank said. 

"We anticipate that continued gains in asset markets will further bolster consumer sentiment, supporting sustained growth in consumption demand."

The bank added Hong Kong's retail and tourism sector could benefit from the weaker US dollar and stronger RMB. 

The government's push to diversify trade will also likely reinforce the city's strategic importance and support eternal trade in the medium term. 

Hang Seng Bank, however, noted downsides to its forecast due to a potentially less favourable interest rate environment and ongoing geoplotical uncertainties. 

" While our base case remains that the Federal Reserve will implement two additional quarter-point rate cuts this year, persistent US inflation could limit the scope for further easing," the bank said.  

"Moreover, geopolitical risks continue to pose a threat, with the potential for rapid capital flows in and out of Hong Kong should more extreme scenarios materialise."

Looking ahead to 2026, the bank forecasts inflation to quicken to 1.9%, unemployment to rise 3.6%, and retail sales to expand 5.8%.

Exports and imports are expected to rise 6.0% and 5.0%, respectively, whilst Mainland China’s GDP is projected at 4.8%, with 1.5% inflation and 5.5% industrial output.