S&P expects ‘gradual weakening’ of Hong Kong economy amid looming deficit, increased spending, though credit rating holds firm
- Credit agency predicts spending will continue to rise as city addresses underlying issues, including increasing societal divisions
- Predicted 1 per cent contraction of economy falls within range estimated by government
Credit rating agency S&P Credit Ratings warned on Thursday that Hong Kong’s looming record deficit would weaken its fiscal health, while growing social spending driven by increasingly tough challenges facing the city would only worsen the situation.
The American firm forecast the economy would shrink 1 per cent this year – after contracting 1.2 per cent last year – due to a combination of the US-China trade war, violent social unrest and the deadly coronavirus outbreak. The epidemic alone would shave 1.2 percentage points from the GDP in 2020, they predicted.
The forecast falls within the government’s estimated range of between 0.5 per cent growth and 1.5 per cent decline.
“We expect a gradual structural weakening in Hong Kong’s fiscal position in the absence of revenue measures, given acute social spending needs,” S&P said in a statement.
Despite the hurdles, Hong Kong’s credit rating – AA+ with a stable outlook – remains the same.
