Hong Kong economy set to cool in H2 after 3.1% first-half gain

On prices, UOB lowered its 2025 headline inflation forecast to 1.6% from 1.8%.

Hong Kong’s economy is expected to moderate in the second half of 2025 after a stronger-than-expected performance earlier in the year, according to UOB Global Economics and Markets Research.

In its Fourth Quarter 2025 Outlook, UOB said it forecasts the city’s economy to grow 2.5% in the second half, compared with 3.1% in the first half, bringing full-year 2025 growth to 2.8%.

The projection sits at the upper end of the Hong Kong government’s official forecast range of 2% to 3%. Growth is expected to slow further to 2.0% in 2026.

The bank said the moderation reflects the unwinding of export frontloading in the second half of the year, though the outlook for the financial sector – particularly wealth management – remains positive.

In the second quarter, the economy expanded 3.1% YoY and 0.4% QoQ, supported by merchandise exports to mainland China and ASEAN, rising services trade in tourism and finance, and the first rebound in private consumption in five quarters.

On prices, UOB lowered its 2025 headline inflation forecast to 1.6% from 1.8%, whilst maintaining its 2026 forecast at 1.9%. Official projections remain at 1.8% for headline CPI and 1.5% for underlying CPI.

Stephen Li, Head of Global Markets, Greater China at UOB, noted that whilst US-China trade tensions have eased, US tariffs on China would continue to affect trade flows.

He added that stabilisation of the mainland economy was “crucial for Hong Kong” and that the 2025 Policy Address, due on 17 September, is expected to outline measures to revitalise the economy, attract investment, and strengthen Hong Kong’s role as an international financial hub.

The report also highlighted recent Hong Kong dollar volatility, with USD/HKD falling to 7.78 in late August before rebounding to 7.81 by early September following Hong Kong Monetary Authority interventions. UOB expects the pair to consolidate at around 7.80 over the next four quarters.