HSBC upgrades GDP forecast on stronger domestic demand

The bank now expects the economy to grow 3.8% in 2026.

HSBC has raised its GDP growth forecast for 2026 to 3.8%, from 2.7%, after the economy posted stronger-than-expected growth in the first quarter.

The bank also raised its 2027 forecast to 3.0%, from 2.8%, putting both projections above Bloomberg consensus estimates of 3.0% for 2026 and 2.5% for 2027.  

Hong Kong’s economy grew 5.9% YoY in the first quarter, its strongest quarterly expansion in nearly five years. 

HSBC said the strong Q1 print, resilient trade flows and improving domestic demand provided a stronger base for the year.

The bank expects limited direct impact from the Middle East conflict, noting that Hong Kong’s economy is largely services-driven and that most of its energy supply comes from mainland China. Qatar accounts for about 12% of Hong Kong’s LNG imports.

Trade has also remained robust despite global uncertainty. HSBC said exports and imports both rose by more than 30% YoY in Q1, helped by AI-related demand and stronger mainland China-linked trade. 

Semiconductor-related trade, which makes up about 40% of Hong Kong’s total trade turnover, also rose by more than 30%.
 

Domestic demand is also strengthening. HSBC said consumption is being supported by wealth effects from the residential property recovery, stronger asset markets and a stable labour market. It expects consumption to grow 4.2% in 2026 and 4.5% in 2027.

Retail sales rose 12% YoY in Q1, with consumer durable goods up 34% and jewellery sales rising 28%. HSBC expects retail sales to grow 12.3% in 2026 and 7.5% in 2027.

Investment is expected to stay buoyant, supported by large-scale government projects such as the Northern Metropolis, AI-led demand, infrastructure bonds and favourable monetary conditions. HSBC forecasts investment growth of 12.1% in 2026 and 7.5% in 2027.

The residential property recovery is also supporting sentiment. Residential property prices rose 4.4% in Q1 from end-2025, whilst transactions increased 5.2% QoQ.

However, HSBC noted that office and retail property prices have continued to fall year-on-year since 2022, showing that some sectors still need broader momentum.