HSBC Research: It is expected that Hong Kong's fiscal deficit expenditure in the 2023 financial year will account for 1.5% of GDP, lower than previous expectations.

HSBC Global Research recently published a report stating that the expected deficit expenditure in Hong Kong for the 2023 fiscal year will account for 1.5% of the GDP, lower than their previous expectations. Most of the recent cyclical support measures may focus on the real estate and capital markets, as these sectors continue to make significant contributions to the economy. Real estate and related activities, as well as financial services, make up around 40% of the GDP and employ about 20% of the workforce. The Hong Kong real estate market continues to face challenges, and the fiscal budget may consider further easing measures, especially once the Fed begins cutting interest rates, which could provide a boost to the Hong Kong property market. HSBC believes that the budget may adjust four major measures in the property market, including Buyer's Stamp Duty (BSD), New Residential Stamp Duty (NRSD), residential mortgage interest rate stress test requirements, and Additional Stamp Duty (SSD). They also anticipate further integration between Hong Kong, the mainland, and the Greater Bay Area. The Hong Kong government may address the challenging population situation by expanding talent programs and increasing support for childcare. Emphasizing Hong Kong's development as an international green financial center, as well as advancements in technology and innovation, will support long-term growth. While expressing concerns about the real estate industry and expanding deficit expenditure, HSBC believes that Hong Kong's financial situation remains robust and sustainable. Diversification of income sources may be necessary in the long run to ensure fiscal sustainability.