Following a contraction in 2022, Hong Kong’s economy rebounded to record 3.2 percent growth in 2023. With the lifting of containment measures and the full reopening of Hong Kong and Mainland China earlier last year, the economy gradually revived in 2023, primarily driven by robust domestic consumption and a surge in inbound tourism. The economy is expected to grow by 3.5 percent in 2024, supported by domestic consumption, continued resumption of cross-boundary travel and tourism and the provision of targeted fiscal support. Inflation may face some upward pressures, reflecting the economic recovery and the tightening labor market, but should remain moderate for 2024.

Hong Kong’s overall external position has stayed strong, bolstered by a substantial current account surplus and ample foreign reserves. Financial conditions have tightened as Hong Kong dollar interest rates have risen in tandem with U.S. interest rates. Hong Kong’s financial system and the Linked Exchange Rate System (LERS) remain resilient, underpinned by large fiscal and foreign exchange reserves, strong and well capitalized banking system, and the automatic interest rate adjustment mechanism.

These conclusions are highlighted in the 2023 Annual Consultation Report on Hong Kong, China.