People's Republic of China-Hong Kong Special Administrative Region: 2026 Article IV Consultation Discussions-Press Release; and Staff Report

The 2026 Article IV Consultation highlights that Hong Kong Special Administrative Region’s economy has continued to recover, with growth in 2025 stronger than expected, supported by robust technology-related exports, improving private demand, and a rebound in financial market activity. The external position in 2025 remained broadly aligned with medium-term fundamentals and appropriate policy settings. Economic growth is expected to moderate amid heightened global uncertainty and domestic vulnerabilities, with downside risks prevailing. In the near term, the Middle East conflict is likely to weaken activity through slower trade partner growth and tighter global financial conditions. Although financial sector risks remain manageable due to strong regulatory oversight and adequate buffers, continued vigilance is essential. The 2026 fiscal stance is appropriate, but stronger medium-term fiscal consolidation is needed to address spending pressures and rebuild fiscal space. Policy priorities should focus on boosting labor force participation, particularly among older workers and women, strengthening education and skills development, supporting reskilling in response to technological change, and improving labor market flexibility. These reforms will enhance productivity, strengthen economic resilience, and support sustainable, inclusive long-term growth.