Hong Kong raised its real GDP growth forecast for the full year 2026 to 4.8%, and overall inflation is expected to remain moderate

The Zhitong Finance App learned that on November 13, the Hong Kong Government published the “Economic Report for the Third Quarter of 2026” and revised figures on Hong Kong's GDP for the third quarter of 2026. Hong Kong's real GDP grew 5.2 percent year on year in the third quarter, and is expected to grow more steadily in the fourth quarter. The real GDP growth forecast for the full year 2026 was revised upward to 4.8% from 3.5% to 4.5% at the time of the August review.

According to the data, Hong Kong's economy expanded strongly in the third quarter of 2026, supported by further accelerated growth in already booming foreign trade and steady internal demand. The year-on-year growth rate of real GDP accelerated from 4.2% in the previous quarter to 5.2% in the third quarter. Total for the first three quarters of 2026, real GDP grew 5.1% year on year, the fastest growth rate in the same period in five years.

The year-on-year real growth in overall exports of goods accelerated to 30.3% in the third quarter, reflecting strong global demand for electronic products related to artificial intelligence, which led to strong trade exchanges. Service exports actually expanded 4.3% year over year, and exports from all major service groups continued to grow.

Internal demand grew steadily in the third quarter. Private consumption expenditure actually expanded 2.9% year-on-year in the third quarter, and recorded an expansion for the sixth consecutive quarter. The growth rate of overall investment expenditure accelerated, with a further 7.5% year-on-year increase in real terms, mainly driven by strong private sector investment expenses.

The labour market remained generally stable in the third quarter. As graduates and school leavers enter the labor market seasonally, the workforce and total number of employed persons both increased compared to the previous quarter. As the workforce grew faster than the total number of employed people, the seasonally adjusted unemployment rate rose slightly to 3.9% in the third quarter. Furthermore, employment income continued to grow steadily year over year in the third quarter.

The asset market was generally stable in the third quarter. In terms of the local stock market, despite fluctuations, the Hang Seng Index (Hang Seng Index) rose 7.6% at the end of the third quarter compared to the end of June, outperforming major indices in many other markets. Entering the fourth quarter, the Hang Seng Index fluctuated repeatedly and closed at 24,316 points on November 11.

In the residential property market, prices remained stable in the third quarter amid relatively active trading. Overall residential sales prices remained generally stable during the quarter, with a cumulative increase of 7% since this year. In terms of transaction volume, the total number of residential property sales contracts submitted to the Land Registry in the third quarter was 13,242, which is roughly close to the five-year average, although lower than the boom level in the first half of this year. Overall residential property rents increased by a further 3% during the traditional peak season in the third quarter.

Basic consumer price inflation rose slightly in the third quarter, mainly due to the fact that international oil prices remained high, which led to an acceleration in price increases for fuel-related projects. However, overall inflation remained moderate as price pressures on other components were generally mild. The year-on-year increase in the basic composite consumer price index rose slightly from 1.7% in the previous quarter to 2.0% in the third quarter.

Looking ahead, Hong Kong's economy is expected to record strong performance throughout the year, supported by strong global investment in artificial intelligence and related trade. Entering the fourth quarter, the latest data shows that the growth momentum continues. Service exports are expected to benefit from the continued increase in the number of visitors to Hong Kong and the steady demand for cross-border financial and commercial services. Domestic demand is expected to remain strong, supported by rising labor incomes, a stable consumer climate, and continued investment by private institutions.

However, uncertainty about the surrounding environment continues. Although the US midterm election results made the market expect the situation in the Middle East to ease, if geopolitical tension continues in the Middle East, it may increase global inflationary pressure and affect the monetary policy trends of major central banks. Trade tensions are likely to heat up again, yields on major advanced economies' sovereign bonds are rising due to high public debt, and market adjustments that may be triggered by overly optimistic expectations of artificial intelligence also need to be closely monitored.

In terms of the inflation outlook, consumer price inflation has so far been lower than expected, reflecting the slow transmission effect of rising international oil prices on fuel-related projects. The fuel subsidies and other related measures introduced by the government earlier have also had a mitigating effect. Although oil prices declined after the US midterm elections, there is still uncertainty about the development of the geopolitical situation, and the transmission effects of earlier high oil prices are expected to continue until 2027. However, as price pressures from other sources are expected to remain largely under control, overall inflation should remain moderate. Taking into account the actual inflation figures for the first three quarters of this year and the above factors, the forecasts for basic and overall consumer price inflation in 2026 were revised downward to 1.9% and 2.0%, respectively, from 2.5% and 2.6% at the time of the August review.