HKMA Raises 2026 GDP Growth Forecast to 3.5%-4.5%
nashnova research
The HKMA lifted its 2026 GDP growth forecast from 2.5%–3.5% to 3.5%–4.5% after first-half performance beat expectations; exports, consumption, and bank earnings all strengthened, setting the tone for the second half.
A one-point upgrade — what justified it?
The HKMA published its half-yearly report on September 29, raising the full GDP forecast band by one percentage point.
Real GDP grew 5.9% year-on-year in Q1 and 4.3% in Q2 — both above the midpoint of the previous forecast.
This means → the upgrade is not optimism; actual data forced the revision. The forecast is catching up with reality.
Where did the growth come from?
Exports: strong global demand for AI-related electronics drove a sharp expansion in goods exports; inbound tourism and cross-border financial activity kept services exports buoyant.
Domestic demand: steady consumer confidence and stable asset markets lifted private consumption; active property transactions and robust private-sector capex sustained investment growth.
In plain terms = AI orders are pulling from the outside, property and spending are pushing from the inside — both engines are running at once.
Why does the offshore renminbi story matter on its own?
By end-July, renminbi customer deposits and certificates of deposit rose 22.7% to RMB 1.345 trillion; certificates of deposit alone surged 60.8%.
Renminbi loan balances grew 15.3% in the first seven months.
The HKMA is also exploring three new initiatives: a 7-day offshore RMB liquidity tender, offshore RMB short-term debt instruments, and a bilateral currency trading framework for the renminbi and the Indonesian rupiah.
This reflects Hong Kong accelerating its offshore RMB infrastructure build-out — not just deposit volumes growing, but new tools and channels being laid at the same time.
How much did banks earn, and how are bad loans trending?
Retail banks posted a 20.4% year-on-year rise in pre-tax operating profit in H1, driven by net interest income, fees and commissions, and trading investment gains.
Return on assets climbed from 1.27% in H1 2025 to 1.40%.
On asset quality, the classified loan ratio — the share of loans flagged as at risk — fell from 2.01% to 1.82%; the overdue and rescheduled loan ratio edged down from 1.54% to 1.47%.
In plain terms = banks are earning more while bad debts shrink — credit risk is contracting, not spreading.
What to watch in the second half?
After seasonal adjustment, Q2 GDP dipped 0.6% quarter-on-quarter — the first half was not a straight-line acceleration; momentum fluctuated.
This means → the forecast upgrade reflects "results already banked" in H1. Whether the pace holds still depends on Q3 and Q4 data.
Key checkpoints: can AI export orders sustain, will local consumer confidence be dragged by external uncertainty, and can the RMB business expansion translate into tangible financial revenue.
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