Uncertainty looms over HK's economy amidst geopolitical tensions, anticipated Trump policies

Lower domestic interest will be positive for private consumption and investments.

Hong Kong’s economy will likely grapple with a challenging 2025 as exports face downside risks due to geopolitical tensions and trade conflicts as well as uncertainties over the anticipated trade policies of the Trump administration, according to UOB.

The lower domestic interest rates, US Fed rate cuts, and the stabilisation in the mainland’s economy will be positive for private consumption and investments.

However, changes in US policies under the Trump administration will bring significant uncertainties which will weaken the recovery outlook next year. These include a second trade war targeting China and inflationary policies leading to smaller US rate cuts.

Furthermore, the weak retail outlook may continue to be a significant drag.

“We keep our growth forecast at 2% for 2025 as we monitor the developments in global trade and the mainland’s economic outlook,” Stephen Li, head of global markets of Greater China at UOB, said.

He noted that headline inflation is expected to remain mild, averaging 1.7% in 2024 and 1.9% in 2025 as external price pressure eases.

“Alongside our expectations that USD is likely to stay bid in the coming quarters as Trump’s tariff policy takes shape, we expect USD or HKD to normalise further towards the middle of its 7.75 to 7.85 trading band,” Li added.