S&P affirms HK's AA+ creditworthiness, acknowledges challenges in coming years

S&P Global Ratings has affirmed its AA+ long-term issuer credit ratings on Hong Kong with a stable outlook on expectations that the economy will maintain growth rates in line with other high-income economies despite uncertain international economic conditions for at least the next two years.

Hong Kong's creditworthiness reflects a record of policymaking that has contributed to a high per capita income, large fiscal buffers, a strong external balance sheet, and credible monetary institutions, the credit rating agency said in a statement on Tuesday.

Hong Kong's fiscal performance has deteriorated due to increased social spending since 2019, and S&P expects a recovery in the city’s finances to be slow, largely due to weak land sales and high infrastructure spending, despite the government's fiscal consolidation program.

Over the next one to two years, this would wear down fiscal buffers and weaken support for the ratings, S&P said.

Fiscal deficit is expected to narrow marginally to 4.8 percent of gross domestic product in the current fiscal year from 5.9 percent for the past year ending in March, but it will be difficult to balance the budget even by fiscal 2028, it said.

The agency forecast real GDP growth to slow to 1.6 percent in 2025 and 1.8 percent in 2026, from 2.5 percent in 2024.

While the direct impact from the US tariffs on Hong Kong is likely to be limited, as exports to the United States comprised roughly 6 percent of total exports last year, S&P said US-China trade relations could weigh on growth in both countries, and result in a hit to Hong Kong's growth.

STAFF REPORTER