Hong Kong’s economy is projected to gain momentum, expanding by 2.5% in the second quarter, up from 1.6% in the first, driven by a rebound in local demand, according to a macroeconomic forecast from the University of Hong Kong (HKU) released on Wednesday.

If realised, this would mark the highest quarterly growth rate in a year.

The forecast indicated that “the city’s economic growth will mainly be driven by domestic demand in 2025.”

“Mild inflation and interest rate cuts are projected to provide impetus to local private consumption expenditure, which is expected to grow 1.9% in the second quarter”, according to the findings.

However, the university's forecast warned that US tariffs on multiple countries could strain the global economy and pose challenges to Hong Kong’s external demand.

Earlier this year, it had projected 1.6% growth for the first quarter, citing heightened China-US trade uncertainties.

Yet despite these concerns, the university maintained its 2025 growth forecast for Hong Kong at 2.5% to 3%.

This outlook is shared by banks and financial institutions. In a February report, Hang Seng Bank noted that while global economic conditions are growing more complex, Hong Kong’s growth could benefit from a stabilising Chinese mainland economy, supportive policies, and falling interest rates. The bank forecast that the city's economic growth this year would remain in line with last year’s 2.5%.

Furthermore, Citi and DBS Bank also predict a 2.5% growth rate for Hong Kong’s economy. Samuel Tse, economist and strategist at DBS Group, expressed confidence that US tariffs would have a limited impact on the city.

Last year, Hong Kong’s economy expanded by 2.5%, with growth slowing from 2.9% in the first half to 2.2% in the second half.

In February, Financial Secretary Paul Chan Mo-Po forecast that Hong Kong’s economy would maintain moderate growth in 2025, with a real-term increase of 2 to 3%.

He noted that after last year’s adjustments, private consumption was showing signs of stability, adding that a continued rise in residents' income and steady growth in asset markets would further drive consumption.

Moreover, with a variety of major events, such as sports competitions, art exhibitions, and financial summits, Hong Kong attracted over 3.4 million visitors in March as of Friday, marking a 12% year-on-year increase, according to his statement.