- Exports remained resilient, fueled by frontloading demand on Chinese goods.
- Consumption was subdued due to strong outbound travel and weak tourist spending.
- Investment moderated amid high funding costs.
- Implication to forecast: We expect a 2.5% GDP growth in 2025. Risk is to the downside owing to trade
Real GDP grew by 2.4% in 4Q, with full year growth of 2.5% in 2024. External demand was resilient, with frontloading demand for Chinese goods. In contrast, consumption was subdued due to strong outbound travel and weak tourist spending. High funding costs continued to weigh on investment activities.
Exports
Real goods exports growth slowed to 1.2% YoY, with full year growth of 4.7%. Mirroring the recovery in China's exports, Hong Kong's exports grew by 8.7% in 2024. Office equipment shipments, precious stones, and electronic machinery posted strong growth. Import demand was moderate, which resulted in net exports contributing 2.2 percentage point to headline growth.
Consumption and tourism
Private consumption was flat in 4Q, with a drop of 0.6% for the year. Daily average mainland tourist arrivals increased 27% to 93k visitors, but the level is still 23% below the 2018 average. Domestic consumption and inbound tourist spending were constrained by substantially lower mainland prices compared to Hong Kong.
Tourist-related shops like department stores and luxury goods saw a full-year sales drop of 14.4% and 14.7% respectively, equivalent to 43.2% and 44.8% declines from 2018 levels.
Strong Hong Kong dollar continued to drive outbound tourism. Daily average resident departures increased by 45% YoY in 2024, while Hong Kong's retail sales value was down 7.3% this year. The higher growth in services imports versus exports depicted the same story.
Investment
Investment contracted by 0.9% YoY after registering five straight quarters of expansion, with whole year growth of 2.4%. Total loans fell 2.8% YoY. Financial services loans fell 6.6%, but stockbroker loans jumped 11% amid improved stock trading activities. Transportation loans grew 9.5% on recovering aviation capacity.
Loan growth is expected to stay subdued as high funding cost persists. Demand from mainland borrowers will remain subdued, with HIBOR spread against SHIBOR above 200 bps.
Deposit
Deposit grew by 7.1% through December, with M2 growth slowing from 8.5% to 7.4%. Growth of M1, or demand deposits, decelerated from 3.2% YoY in September to 1.3% in December. Fixed deposit to current and savings account ratio remained elevated at 58.4%. Liquidity conditions remain tight.
Property
Residential rents rose 5.6% in 2024, reflecting increasing housing demand from overseas students, returning expatriates, and incoming foreign talent. Average residential rental yield increased from 2.64% in February to 2.88% in December. Lowered Hong Kong dollar rates had helped narrow negative carry between rental returns and risk-free deposit rates.
Primary market sales transactions jumped to 2,489 units in November before retreating during the holiday season. Secondary market sales transactions also saw an increase from the third quarter before the rate cuts. Home prices saw stabilization in 4Q, with the Centa City Leading Index ticking up to 138.6 in mid-January from trough of 135.9 in September last year.
Excess property supply will likely keep prices in check. Our property analyst expects mild growth in 2025 as developers are adopting flexible pricing to liquidate unsold inventory. Note that unsold units returned to the post-SARS high of over 22,000 in 4Q.
Inflation
Consumer prices remained at 1.4% YoY in December. Prices on clothing and footwear, durable goods, and basic foods declined 3.2%, 1.6% and 0.6% YoY during the month amid subdued domestic consumption sentiment.
We maintain our view of a 2.5% full-year GDP growth forecast for 2025. Path of US monetary policy is a key risk. The economy continues to be weighed by high funding costs and the strong Hong Kong dollar. Net exports could as a buffer amid frontloading activities from US importers, but intensification of trade war could spoil the dynamic.
The People's Bank of China (PBOC) has pledged to support economic development in Hong Kong in four key areas: encouraging more corporates to get listed and issue bonds in Hong Kong, expanding the connect in equity, bond, wealth management, and interest rate swap markets, deepening Greater Bay Area (GBA) financial collaboration and allocating more foreign exchange reserves to Hong Kong.
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Nathan Chow 周洪禮
Senior Economist and Strategist - China & Hong Kong 高級經濟學家及策略師 - 中國及香港
[email protected]
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