Fitch keeps Hong Kong’s ‘AA-’ credit rating, as government touts fiscal strength Fitch Ratings has maintained Hong Kong’s “AA-” credit rating and “stable” outlook, which the government has said is a reflection of the city’s strong financial position. A government spokesman said on Friday that the unchanged rating and outlook recognised the city’s “large fiscal buffers, robust external finances and a low level of fiscal debt”, as well as the banking sector’s solid funding and liquidity. Earlier in the day, Fitch issued a report that highlighted the positive fundamentals while also noting the city’s balance sheet continued to worsen. “The deterioration does not cause imminent pressure on the credit profile, but fiscal risks are tilted to the downside over the medium term,” the American credit ratings agency said. The “AA-“ rating means very high credit quality and very low credit risk. It is three notches from the “AAA” ceiling. Fitch predicted Hong Kong’s gross domestic product (GDP) would grow by 2.2 per cent this year compared with 2024, before posting another 2.5 per cent increase in 2026. “This will be relatively weak compared with its historic performance, considering that GDP has only returned to the levels before the protest and pandemic shocks, but remains favourable relative to peers,” the ratings agency said. Fitch also pointed to weak consumer demand as Hongkongers were increasingly spending across the border, while mainland Chinese tourists were also less likely to splash out. The Hong Kong government has set its GDP growth forecast at between 2 and 3 per cent for the year, following a 2.5 per cent year-on-year expansion in 2024. Fitch said the US-China trade war would weigh on the city’s economic growth. “The US tariff rates on Hong Kong are still higher than in 2024, at around 40 per cent, and the outlook is highly uncertain,” it said, despite both the earlier announcement of a 90-day pause in the tariff war. The government spokesman said global trade tensions had eased to a certain extent recently and China’s latest proactive fiscal and monetary policies would provide business and investment opportunities. “As a ‘superconnector’ and ‘super value-adder’, Hong Kong will continue to actively link the mainland with the world,” he said. The Fitch report said Hong Kong continued to face challenges in fully restoring its “business dynamism and competitiveness” as a global financial and commerce hub. It cited gradual shifts in governance practices since the 2019 social unrest, strict pandemic-era curbs, rising geopolitical tensions and weaker growth in China. But the agency noted that the Hong Kong government was now focusing on diversifying its economic ties, particularly to the Middle East and Southeast Asia, and expanding its role as a hub for Chinese companies seeking to expand globally. Financial Secretary Paul Chan Mo-po last month revised the city’s deficit for 2024-25 to HK$80.3 billion, 8 per cent lower than the estimate in his budget. The 2024-25 financial year was the government’s third straight deficit, and Chan predicted another shortfall of HK$67 billion in 2025-26. “Risks remain tilted towards wider and more prolonged deficits, given uncertainties around property-related revenue,” the Fitch report said. But it said fiscal reserves were equal to 20 per cent of the city’s GDP at the end of 2024-25, which it regarded as a strength compared with peers in the “AA” category. Fitch also pointed out that the banking sector was supported by solid funding and liquidity, as well as strong capital positions. The government spokesman added that global investors’ confidence in the city was strengthening. Meanwhile, Hong Kong General Chamber of Commerce chairwoman Agnes Chan Sui-kuen is expected to organise a business trip to the US in the fourth quarter to promote trade and business after postponing one in April amid the escalating trade war. Chan was re-elected for another 12 months on Friday. She expressed optimism for the city’s recovery in the economy and exports, citing a 3.1 per cent year-on-year expansion in GDP in the first quarter and an 8.7 per cent jump in exports, led by growth in new Southeast Asian and Middle Eastern markets. She also pointed to the change in spending habits and transformation in technology. https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3311618/fitch-keeps-hong-kongs-aa-credit-rating-government-touts-fiscal-strength (ICE HONG KONG)

Fonte notizia: South China Morning Post