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The government has raised its 2026 real GDP growth forecast to 4.8 percent from the previous 3.5–4.5 percent range in the August review, noting that overall inflation should stay moderate as other price pressures are expected to remain largely contained.
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The forecasts for the underlying and headline consumer price inflation rates for 2026 are revised down to 1.9 percent and 2.0 percent, respectively, from 2.5 percent and 2.6 percent in the August round of review.
Government economist Irina Fan said consumer price inflation has so far been lower than expected, reflecting slower-than-anticipated pass-through of higher international oil prices to fuel-related items, aided by earlier government fuel subsidies. Although oil prices eased after the US midterm elections, geopolitical uncertainty persists, and the earlier oil-price increases are likely to continue feeding through into 2027.
Looking ahead, Fan said the Hong Kong economy is poised for a strong full-year performance, supported by robust global AI investment and related trade.
Entering the fourth quarter, she said incoming data pointed to sustained growth momentum, with exports of services expected to benefit from continued growth in visitor arrivals and steady demand for cross-boundary financial and business services.
Domestic demand is expected to remain resilient, supported by rising labor earnings, solid consumer sentiment and continued private sector investment.
Fan noted that although the US midterm election results have raised hopes of de-escalation, the external environment still contains uncertainties, including prolonged geopolitical tensions in the Middle East, which could intensify global inflationary pressures and affect major central banks' monetary policy paths.
The market should also closely monitor the potential resurgence of trade tensions, rising sovereign bond yields in major advanced economies amid high public debt, and a possible market correction if expectations for AI prove too optimistic.
Key indexes to watch include:
- Growth in total exports of goods quickened to 30.3 percent year-on-year in real terms in the third quarter, reflecting robust trade flows amid strong global demand for artificial intelligence-related electronic products. Exports of services expanded by 4.3 percent in real terms over a year earlier, with all major service groups continuing to grow.
- Domestic demand showed sturdy growth in the third quarter. Private consumption expenditure expanded by 2.9 percent in real terms in the third quarter over a year earlier, marking its sixth consecutive quarter of expansion. Overall investment expenditure picked up and rose further by 7.5 percent year-on-year in real terms, driven mainly by strong private sector investment spending.
- The labor market stayed broadly stable in the third quarter. Both labor force and total employment increased over the preceding quarter amid the seasonal entry of graduates and school leavers. With the labor force growing faster than total employment, the seasonally adjusted unemployment rate edged up to 3.9 percent in the third quarter. Separately, employment earnings continued to grow solidly in the third quarter over a year earlier.
- Asset market conditions were broadly stable in the third quarter. In the local stock market, the Hang Seng Index (HSI) closed the third quarter 7.6 percent above its end-June level amid fluctuations, outperforming several major indices elsewhere. Entering the fourth quarter, the HSI fluctuated and closed at 24,316 on November 11. In the residential property market, overall flat prices were largely stable during the quarter, while transactions remained relatively solid and broadly on par with the five-year average.
- The underlying consumer price inflation edged up further in the third quarter, mainly driven by a pick-up in fuel-related components as international oil prices stayed high. Nevertheless, overall inflation remained moderate, as price pressures on other components were generally modest. The year-on-year increase in the underlying Composite Consumer Price Index (Composite CPI) edged up to 2 percent in the third quarter from 1.7 percent in the preceding quarter.
