United Overseas Bank (UOB) has raised its forecast for Hong Kong’s GDP growth in 2024 to 3.2% from a previous estimate of 2.9%, despite the headwinds in the second half of the year. 
 
Hong Kong's economy is facing difficulties due to declining external demand and changes in supply chains, which may lead to reduced trade volumes, along with weak consumer confidence domestically, according to UOB. 
 
“We expect the GDP to rise 3.2% year-over-year in the second half of 2024, factoring in modest sequential growth in the next two quarters,” according to Stephen Li, head of Global Markets for Greater China at UOB. 
 
The Composite Purchasing Managers’ Index (PMI) has been in contraction since May, while headline Consumer Price Index (CPI) inflation averaged 1.7% year-on-year and core CPI inflation averaged 1.0% year-on-year from January to July, Hong Kong Business reports.
 
Prices for dining out, takeaway food, and transport saw significant increases, whereas energy-related items and durable goods continued to experience downward pressure.
 
In the short term, inflation is anticipated to stay moderate. UOB has kept its forecast for headline inflation at 2.0% for 2024.
 
Whereas the government anticipates that overall inflation in Hong Kong will remain mild in the near term, although sustained economic growth could apply moderate upward pressure on domestic costs. 
 
“External price pressure is likely to ease as inflation in developed markets trends lower, but a weaker HKD will result in higher imported cost pass-through. Domestically, increases in business costs will be capped by a weak rental outlook,” Li went on to add.
 
Earlier in the year, UOB Global Economics increased its forecast for Hong Kong's economic growth in 2024 to 2.9% from 2.5% due to rising confidence in the region's economic outlook, supported by stable conditions in mainland China and government initiatives to strengthen the property and tourism sectors.