Trade tensions and sluggish investment are expected to weigh on Hong Kong's economic expansion in the coming years. In 2025, the region’s economy is anticipated to grow at a modest rate of 2.3%, slightly lower than the previous year's performance. The Asian Development Bank highlights that this slowdown is primarily driven by reduced trade flows due to escalating disputes between major global economies. As a result, Hong Kong, acting as a key regional trade hub, will likely experience the ripple effects of these tensions, with growth gradually improving to 2.5% by 2026.

While domestic consumption shows signs of recovery, external factors continue to influence spending patterns. A strong local currency encourages residents to seek goods and services overseas, further affecting private consumption within the territory. Despite this trend, a robust labor market and rising wages could partially offset these challenges, offering some support for household expenditure. Meanwhile, inflation is projected to rise marginally over the next two years, influenced by housing costs and labor expenses, yet kept in check by subdued production levels and declining international food and energy prices. Public investment initiatives, particularly those linked to large-scale infrastructure projects such as the Northern Metropolis development, may provide a much-needed boost to the economy.

A gradual improvement in fiscal conditions is anticipated, with the deficit forecast to shrink to 2.0% of GDP in the fiscal year 2025. This positive outlook stems from increased revenue streams, largely attributed to higher earnings and profits tax, along with a rebound in land premiums. Nevertheless, uncertainties persist, particularly concerning geopolitical tensions that could introduce volatility into the financial sector, which forms a significant portion of Hong Kong’s GDP. Policymakers are now focusing on strategic measures, including high-profile events, to reinvigorate growth and enhance the city’s long-term attractiveness. Such efforts underscore the importance of resilience and innovation in navigating an uncertain economic landscape.