Hong Kong economy to log 2.7% growth in 2025

Logistics and trade remain under pressure from regional competition.

The Hong Kong economy’s growth is expected to stand at 2.7% in 2025 and decelerate to 2.5% in the medium term on the back of rapid population ageing and slower capital accumulation, according to estimates by the executive board of the International Monetary Fund (IMF) and Hong Kong officials.

The IMF executive board recently concluded Article IV consultation discussions with Hong Kong, which took place on 14 January 2025. The IMF holds bilateral discussions with members, usually every year, under Article IV of the IMF’s Articles of Agreement.

The city remains on the path of “gradual but uneven recovery” following three years of recession since 2019, the IMF executive board wrote in a 23 January press release.

However, the board warned that “emerging and longer-term challenges require closer attention.”

Tight financial conditions, adjustment in the property sector, and challenging environments for small and medium enterprises (SMEs) have flagged economic recovery’s momentum.

“Moreover, traditional growth drivers like logistics and trade are under pressure from regional competition while the territory’s rapid aging and slowing labor force growth pose further challenges,” the board wrote.

Economic growth is subject to downside risks, such as sharper-than-expected slowdown in mainland China due to the escalation of trade tensions, and a deeper or more protracted adjustment in the property market.

To achieve a more stable revenue base, the board recommended raising taxes in Hong Kong in order to meet the city’s aging-related and investment spending needs.

Suggestions include further increases to the progressivity of personal income taxes, with higher rates for top earners; raising excise taxes; introducing a VAT; and taxes on capital gains and dividends.