Budget Speech
Economic Outlook for 2023 and Medium-term Outlook
15. The market generally expects that the negative impact on the global economy of the sharp tightening of monetary policies by major central banks will become more apparent this year. Heightened geopolitical tensions will also add to the downside risks. Last month, the IMF forecast that global economic growth would slacken further to 2.9 per cent this year.
16. Sluggish external demand will continue to affect the Mainland's exports this year. Yet, the Mainland economy is resilient and has solid fundamentals. As economic activities quickly revive from the epidemic and the various economic stabilisation measures implemented over the past year gradually yield results, the growth of the Mainland economy is expected to accelerate visibly.
17. The economic growth of the US and Europe is expected to decelerate further this year. The market anticipates that US interest rates will rise further in the first half and stay elevated for some time, which is expected to further dampen demand. For the eurozone economy, economic sentiment remained subdued. The pace of economic growth will soften notably due to the continued impact of monetary policy tightening and the Russia-Ukraine tension.
18. Given the further weakening of growth momentum in advanced economies, Hong Kong's exports of goods will still face severe challenges this year. However, the accelerated growth of the Mainland economy coupled with the lifting of restrictions on cross-boundary truck movements should alleviate part of the pressure. As for exports of services, with the removal of the quarantine requirements for inbound persons and the normal cross-boundary travel between Hong Kong and the Mainland, the number of visitor arrivals is expected to see a strong rebound.
19. Domestically, as overall economic sentiment improves in tandem with the revival of economic activities and the rapid return of Hong Kong's exchanges with the Mainland and the world to normalcy, private consumption will increase. The better economic prospects will also be conducive to fixed asset investment, though tightened financial conditions will remain a constraint.
20. Having regard to the above factors, I forecast that the Hong Kong economy will see a visible rebound this year with growth of 3.5 to 5.5 per cent for the year as a whole.
21. In respect of prices, domestic cost pressures will increase alongside the economic recovery. Despite some moderation, external price pressures will remain notable this year. Taking all factors into account, I forecast that the underlying inflation rate and the headline inflation rate will rise to 2.5 per cent and 2.9 per cent respectively this year.
22. In the medium to long term, the Hong Kong economy will see abundant opportunities. Our country pursues high-quality development and will maintain reasonable growth. Other emerging Asian economies will also continue to register relatively fast growth. Meanwhile, advanced economies such as the US and the eurozone are expected to gradually return to their long term growth trends after the current challenges.
23. Hong Kong's advantages under "One Country, Two Systems" are unique. Besides, the current-term Government strives to forge a better integration of a "capable government" and an "efficient market", proactively strengthening competitiveness, identifying new impetus for growth and expanding economic capacity. The various measures will yield results gradually.
24. Considering all the above factors and taking into account the catch-up growth in the initial period arising from the continued return of economic activities from the epidemic to normalcy, I forecast that the Hong Kong economy will grow by an average of 3.7 per cent per annum in real terms from 2024 to 2027, higher than the trend growth of 2.8 per cent during the decade before the epidemic. The underlying inflation rate is forecast to average 2.5 per cent per annum.
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