The IMF acknowledges Hong Kong's status and role as an international financial center and expects its fiscal deficit to narrow.

After the staff of the International Monetary Fund (IMF) delegation completed discussions on the Article IV consultation for the Hong Kong Special Administrative Region for 2024, they released a preliminary assessment on January 10th. The delegation believes that despite facing multiple challenges, the Hong Kong economy is gradually recovering. The delegation reaffirmed Hong Kong's status and role as an international financial center, and acknowledged the resilience of Hong Kong's financial system within a sound institutional framework, ample policy buffers, and a well-functioning linked exchange rate system. Based on the current economic situation, the delegation believes that the direction and path of gradually integrating fiscal policies by the Hong Kong SAR government are appropriate. The delegation expects that with the implementation of new revenue measures, the effectiveness of expenditure controls, and a gradual reduction in pandemic-related spending, Hong Kong's fiscal space remains ample, and the fiscal deficit is expected to narrow further. Financial Secretary Paul Chan Mo-po stated that the Hong Kong government will continue to reinforce and enhance Hong Kong's position as an international financial center, leveraging the unique role of "one country, two systems" and adopting a strategy focused on both increasing revenue and reducing expenditures to restore fiscal balance within a few years. In terms of reducing expenditures, the government will control recurrent spending growth to gradually narrow the deficit gap; in terms of increasing revenue, it will maintain Hong Kong's competitive advantage of a simple and low tax regime, consider the actual social situation to avoid weakening the economic recovery momentum, and adhere to the principle of "those who can afford more, pay more" to minimize the impact on the general public. The government will carefully study and analyze the various suggestions put forward by the IMF. HKMA Chief Executive Eddie Yue welcomed the delegation's recognition of the robust regulatory framework and important measures to maintain financial stability in a constantly changing environment, as noted by the delegation, the linked exchange rate system remains the most suitable arrangement for Hong Kong. The delegation projects the real GDP of Hong Kong to grow by 2.7% in both 2024 and 2025. The delegation agrees with the efforts of the Hong Kong SAR government in developing new sources of growth, including promoting the Greater Bay Area development plan, increasing investments, and attracting overseas talent and high-end industries to Hong Kong. The delegation also agrees that the government's decision to lift all residential property demand management measures is appropriate. The delegation also agrees that Hong Kong's registered banks have sufficient capital, high liquidity, and strong profitability; the local mortgage delinquency rate remains low, and low unemployment and high household net worth support the quality of household credit. The delegation also welcomes the HKMA's decision to introduce a positive neutral countercyclical capital buffer (CCyB) ratio. The delegation also noted the significant progress made by the Hong Kong SAR government and financial regulatory authorities in developing a thriving green and sustainable finance sector, and believes that advancing the development of a sustainable finance hub can enhance Hong Kong's competitiveness as an international financial center.