IMF Executive Board Concludes 2026 Article IV Consultation Discussions with the People’s Republic of China—Hong Kong Special Administrative Region
IMF News, May 22, 2026
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- Published: May 22, 2026
Executive summary and key findings
- The Executive Board completed the Article IV Consultation for the People’s Republic of China—Hong Kong Special Administrative Region (SAR) and considered and endorsed the staff appraisal without meeting on a lapse-of-time basis. The authorities have consented to the publication of the Staff Report prepared for this consultation.
- Hong Kong SAR’s economy continued to recover, with growth in 2025 stronger than expected, supported by robust technology-related exports, improving private demand, and a rebound in financial market activity.
- Recovery remains incomplete: economic activity is still below its pre-pandemic trend, with persistent slack, weak private investment, and declining labor force participation, both still below pre-pandemic levels.
- The banking system remains resilient, underpinned by strong capital, ample liquidity, and solid profitability, although asset quality pressures persist in some segments, particularly domestic commercial real estate (CRE) exposures, which represent the principal near-term financial risk.
- The external position in 2025 was broadly in line with the level implied by medium-term fundamentals and desirable policies.
Outlook, projections, and risks
- Near-term growth is expected to moderate, reflecting weaker external demand and tighter financial conditions amid the war in the Middle East.
- Over the medium term, declining youth labor force participation and population aging are expected to weigh on labor supply and potential growth, projected at around 2¼ percent.
- Key downside risks: intensification of geopolitical tensions, further tightening of financial conditions, potential disruptions to trade and financial flows, further declines in CRE collateral values, and a slowdown in the technology cycle.
- Upside risks: stronger productivity gains from AI and faster implementation of strategic investment projects.
Selected economic and financial indicators (highlights from the staff table)
- Real GDP (percent change): 2021: 6.5; 2022: -3.7; 2023: 3.2; 2024: 2.6; 2025: 3.5; 2026: 2.4; 2027: 2.3; 2028: 2.2.
- Private consumption (percent change): 2021: 5.6; 2022: -2.2; 2023: 6.8; 2024: -0.2; 2025: 1.7; 2026: 2.1.
- Gross fixed capital formation (percent change): 2021: 8.3; 2022: -7.4; 2023: 11.4; 2024: 1.9; 2025: 4.3; 2026: 7.2; 2027: 1.3; 2028: 0.5; 2029: 1.4.
- Output gap (in percent of potential GDP): 2021: -2.3; 2022: -4.1; 2023: -4.0; 2024: -2.6; 2025: -1.6.
- Employment (percent change): 2024: -0.6; 2025: 0.4.
- Unemployment rate (percent, period average): 2021: 5.2; 2022: 2.9; 2023: 3.0; 2024: 3.7; 2025: 3.3; 2026: 2.8.
- Consumer prices (inflation, percent change): 2024: 1.8; 2025: 2.5.
- GDP deflator (percent change): 2024: 4.2; 2025: 1.0.
- Consolidated budget balance (percent of GDP) 1/: 2021: -6.7; 2022: -5.8; 2023: -5.9; 2024: -4.9; 2025: -5.3; 2026: -3.3; 2027: -0.8.
- Revenue (percent of GDP): 2021: 24.2; 2022: 22.1; 2023: 18.4; 2024: 17.7; 2025: 18.8; 2026: 18.1; 2027: 20.0; 2028: 20.5; 2029: 20.9.
- Expenditure (percent of GDP): 2021: 28.9; 2022: 23.6; 2023: 23.7; 2024: 23.4; 2025: 23.3; 2026: 21.9; 2027: 21.7.
- Fiscal reserves (as of end-March, percent of GDP): 2021: 33.4; 2022: 29.7; 2023: 24.6; 2024: 19.7; 2025: 20.1; 2026: 20.4; 2027: 20.3.
- Interest rates (percent, period average) — Best lending rate: 2021: 5.0; 2022: 5.1; 2023: 5.8. Three-month HIBOR: 2021: 4.6; 2022: 4.5; 2023: 3.1.
- House prices (year-on-year percent change for last quarter): 2021: -15.0; 2022: -7.0; 2023: -7.1.
- Export value (merchandise trade, percent change): 2021: 26.3; 2022: -8.6; 2023: -7.8; 2024: 8.7; 2025: 15.3; 2026: 12.6; 2027: 4.7; 2028: 3.8.
- Import value (merchandise trade, percent change): 2021: 24.3; 2022: -7.2; 2023: -5.7; 2024: 6.0; 2025: 15.5; 2026: 12.4; 2027: 4.4.
- Current account balance (= S-I balance, percent of GDP): 2021: 11.8; 2022: 10.2; 2023: 8.4; 2024: 13.1; 2025: 12.2; 2026: 12.3; 2027: 12.1; 2028: 11.9; 2029: 11.5.
- Foreign exchange reserves (In billions of U.S. dollars, end-of-period): 2021: 497; 2022: 424; 2023: 426; 2024: 422; 2025: 428; 2026: 468; 2027: 499; 2028: 527; 2029: 558; 2030: 592; 2031: 649.
- Net international investment position (percent of GDP): 2021: 574; 2022: 492; 2023: 461; 2024: 490; 2025: 586; 2026: 569; 2027: 546; 2028: 534; 2029: 522; 2030: 510.
Financial sector assessment and recommendations
- The financial sector is resilient, but asset quality pressures persist in CRE and some segments of corporate exposures.
- Recommendations:
- Maintain sustained supervisory focus on exposures to highly leveraged corporates, particularly in real estate and SMEs.
- Ensure timely recognition of expected credit losses and adequate provisioning.
- Target remaining SME support measures to ease liquidity strains without distorting credit allocation or delaying necessary restructuring of non-viable firms.
- Continue prudent underwriting and sound valuation practices in CRE, and maintain capital buffers commensurate with risks.
- Expand system-wide stress testing to enhance macroprudential oversight, particularly as the NBFI sector evolves.
- Keep macroprudential measures related to residential real estate unchanged, given stabilization in market conditions.
Fiscal policy guidance
- The fiscal stance in 2026 is appropriate to support the incomplete recovery, but stronger medium-term consolidation is needed to address spending pressures and rebuild fiscal reserves.
- Risks to fiscal sustainability: population aging, social protection needs, and large infrastructure investments.
- Recommendations:
- Pursue broader revenue reforms to strengthen and stabilize the revenue base and reduce reliance on cyclical revenue sources.
- Preserve growth-enhancing investment while consolidating over the medium term.
Housing policy
- Improving housing affordability requires sustained expansion of public housing supply and better targeting of existing programs.
- Authorities’ efforts to scale up public housing production are critical to reducing waiting times.
- Stronger enforcement of eligibility criteria and measures to curb misuse will improve allocation efficiency.
Digital, sustainable finance, and regional role
- Hong Kong SAR is well positioned to advance digital and sustainable finance, supported by strong regulatory frameworks and initiatives such as Fintech 2030.
- Recommendations:
- Maintain “same activity, same risk, same regulation” principle and enhance cross-sectoral coordination.
- Improve data collection to manage emerging risks from crypto assets and tokenization.
- Continue attention to operational and cyber risks.
- Scale up private capital mobilization for climate finance, ensure high-quality sustainability disclosure standards, and mitigate greenwashing risks.
- Hong Kong SAR’s role as a super-connector and as a leading offshore RMB hub remains critical; deeper integration through Connect schemes, the Greater Bay Area, and the Northern Metropolis can support innovation and high value-added services.
Structural and labor market policies
- Industrial policy can support diversification and innovation but should be time-bound, targeted, grounded in identified market failures, and accompanied by strong governance, transparency, and regular evaluation.
- To address declining labor force participation and demographic pressures, policy recommendations include:
- Encourage greater participation among older workers and women.
- Strengthen education and training to reduce skills mismatches.
- Support reskilling and job transitions in the face of technological change.
- Enhance labor market flexibility and improve job matching to sustain inclusive growth.
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