IMF releases assessment report on HK's economy, recognizing linked exchange rate system and integration into GBA
The International Monetary Fund (IMF) has completed its discussions with the Hong Kong Special Administrative Region (HKSAR) government regarding the 2024 Article IV Consultation Discussions, releasing its latest assessment report. The IMF noted that under a robust institutional framework, ample capital, and liquidity support, Hong Kong's financial system remains resilient, with the linked exchange rate system operating smoothly.
The HKSAR government expressed that the IMF reaffirmed Hong Kong's status as an international financial center, highlighting its highly open economy and substantial financial services sector that aligns with global standards. The linked exchange rate system continues to be deemed suitable and a cornerstone for economic and financial stability.
Economic Recovery and Growth Projections
According to the report, Hong Kong's economy has faced various challenges since 2019, including social unrest, tensions between China and the U.S., and the COVID-19 pandemic, leading to a three-year slowdown. However, the economy is now gradually recovering.
The IMF predicts a real GDP growth of 3.3% for 2023, followed by 2.7% growth in 2024 and 2025, with a medium-term GDP growth rate of around 2.5%. Lifting COVID-19 restrictions in early 2023 has stimulated internal demand and a strong rebound in inbound tourism.
Strengthening the Financial Framework
The report emphasizes that the HKSAR government is enhancing its regulatory framework to maintain financial stability and is fostering a vibrant digital financial ecosystem to solidify Hong Kong's international financial center status. The IMF believes the linked exchange rate system remains appropriate and should continue to serve as a pillar for economic and financial stability.
Integration into the GBA
The IMF supports Hong Kong's active integration into the Greater Bay Area (GBA) development. The plan aims to create new global technology clusters and attract skilled labor to enhance economic growth prospects. Key to this development is encouraging private enterprises to lead technological research and development, leveraging Hong Kong's strengths in finance, renowned academic institutions, and legal frameworks.
The government must also ensure continued attraction of skilled labor to meet set targets for talent acquisition, along with measures to increase labor participation, especially among older adults and women.
Government Response to the IMF Report
In response to the IMF's report, the HKSAR government reiterated the IMF's acknowledgment of Hong Kong's international financial center status and the resilience of its financial system under a solid institutional framework and effective policy buffers. The IMF praised the government's focus on supporting economic recovery, managing financial stability risks, and addressing structural challenges.
The IMF delegation visited Hong Kong from Nov. 11 to 22, 2024, engaging in discussions with government officials, financial regulators, and representatives from the private sector.
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