The International Monetary Fund has completed its Article IV consultation for Hong Kong SAR, with the Executive Board endorsing the staff appraisal without a formal meeting under its lapse-of-time procedure. Supported by technology-related exports, recovering private demand and stronger financial market activity, growth in 2025 was stronger than expected and real GDP moved above its pre-pandemic peak, but the recovery remains incomplete because activity is still below trend, private investment is weak and labor force participation has declined. Near-term growth is expected to moderate as weaker external demand and tighter financial conditions linked to the war in the Middle East weigh on activity, with medium-term growth projected to settle at around 2¼ percent, while domestic commercial real estate remains the main near-term financial risk despite resilient bank capital, liquidity and profitability. On policy, the Fund judged the expansionary fiscal stance in 2026 appropriate given soft domestic demand, but said medium-term plans need stronger consolidation to rebuild fiscal reserves and cover rising pressures from ageing, social protection and infrastructure, implying broader revenue reforms. It called for continued supervisory focus on highly leveraged corporates, especially in real estate and small and medium-sized enterprises, timely recognition of expected credit losses, prudent underwriting and capital buffers in commercial real estate, and broader system-wide stress testing as non-bank finance develops. Unchanged macroprudential measures for residential property were seen as appropriate given stabilising conditions, while broader structural priorities include expanding and better targeting public housing, managing crypto asset and tokenization risks under a same activity, same risk, same regulation approach, strengthening climate finance safeguards, and raising labor force participation through policies for older workers, women, training and job matching. The authorities consented to publication of the staff report, which the IMF said will be released shortly.
International Monetary Fund2026-05-22
International Monetary Fund completes Hong Kong SAR Article IV consultation and calls for stronger medium term fiscal consolidation
The IMF’s Article IV consultation for Hong Kong SAR found 2025 growth exceeded expectations, with real GDP above its pre-pandemic level, but an incomplete recovery and medium-term growth projected at about 2¼ percent amid risks from weaker external demand and domestic commercial real estate. It judged the expansionary 2026 fiscal stance appropriate but urged stronger medium-term consolidation, broader revenue reforms, tighter oversight of highly leveraged corporates, enhanced stress testing, continued property macroprudential measures, better targeted public housing, crypto and tokenization regulation under “same activity, same risk, same regulation,” stronger climate finance safeguards, and steps to raise labor force participation.