Amidst a complex global economic landscape, Hong Kong's economy is projected to face continued challenges in the coming year. The city's growth momentum is anticipated to decelerate, with gross domestic product (GDP) expected to reach 2.3% in 2025. This slowdown is influenced by several factors, including weakened economic conditions in mainland China and escalating trade uncertainties under the new administration in the United States. Despite a slight improvement in the final quarter of 2024, where GDP increased by 2.4% year-over-year, the overall trajectory points towards a more cautious outlook for the future.

The retail sector has been particularly hard hit, with sales continuing their downward trend. In December, retail sales plummeted by nearly 10%, reflecting a deeper contraction compared to the previous month. When measured against pre-pandemic levels, retail activity in December was significantly lower, standing at just over 70% of its 2018 figures. Additionally, the property market has experienced a downturn, with home prices dropping by 7.1% in 2024, and further declines anticipated in the upcoming year. However, not all sectors are suffering; net exports have provided some support, contributing positively to the economy.

Despite these challenges, there are potential avenues for recovery. If the Federal Reserve decides to cut interest rates sooner than expected, or if China’s economy rebounds more rapidly, it could provide much-needed relief to Hong Kong’s economic situation. Increased tourist arrivals from mainland China could also stimulate local businesses. While inflation remains relatively low, hovering around 1.8%, certain categories like alcohol and tobacco have seen significant price increases. Looking ahead, the government may need to consider fiscal adjustments to address budgetary pressures, but the resilience of key sectors offers hope for a brighter economic horizon.