Ahead of the United States-China talks at the Group of 20 leaders' summit in Buenos Aires, Argentina, today, some economists and analysts are expecting lower growth for Hong Kong's economy for this year and the next.
Of the six economists and analysts polled by The Straits Times, five expected the city's gross domestic product (GDP) growth for this year to hover around 3.3 per cent to 3.4 per cent. One said she expected it to be between 3 per cent and 4 per cent.
With uncertainties led by the US-China trade war that has spilled over into other areas such as technology and government policies, growth of Hong Kong's economy is now projected to slow to between 2.1 per cent and 3 per cent next year.
In the middle of this month, the government recalibrated its estimates for this year to 3.2 per cent, from the previous 3 per cent to 4 per cent estimate.
Despite the doom and gloom, OCBC Wing Hang Bank economist Carie Li said the city is fundamentally strong enough to withstand the headwinds, given its sizeable foreign currency reserves and strong surpluses.
This, as Hong Kong's official foreign currency reserve assets amounted to US$423.1 billion (S$580.2 billion) last month.
"Besides, fiscal account surplus to GDP ratio reached its highest since 2007/2008 at 5.2 per cent in 2017/2018," Ms Li said.
CMC analyst Margaret Yang believes that while the outlook remains tough for Hong Kong, "the probability of recession remains low in the foreseeable future".
That said, observers noted that China's economy has been slowing, and that although it has measures to ease downside risks on growth, the Chinese economy will be weighed down further by a prolonged trade war.
Given that Hong Kong's economy is tied to China's in areas such as trade, tourism, business and finance, China's slowdown will weaken the city's outlook, they said.
In particular, confidence of Hong Kong businesses in China, particularly in the Greater Bay Area, has been hurt by the escalation in trade tensions, said DBS Group Research's Samuel Tse.
"Hong Kong is the largest source of realised foreign direct investment for China (53.1 per cent share last year), especially in Guangdong province (63.8 per cent share in 2016). Meanwhile, Guangdong's exports accounted for 51.7 per cent of its GDP in 2017, well above the national average of 18.6 per cent," he added.
ING Wholesale Banking's Iris Pang said that extended US-China woes will hit Hong Kong trading companies, as well as the logistic and port services.
She added that demand for private housing in Hong Kong is falling and this is expected to continue next year.
The city's unaffordable residential property market will soften due to rising interest rates and an increasingly negative sentiment, said Mr Chua Han Teng, head of Asia country risk at Fitch Solutions.
"Consumer spending will likely be negatively impacted by a decline in wage growth and waning wealth effects stemming from weakness in asset prices," he added.
But bright spots remain in the year ahead, said Ms Yang, who favours shares of defensive utilities, healthcare and consumer staples.
Banking and insurance companies' stocks are relatively resilient, she said, adding that cyclical and trade-reliant sectors such as semiconductors, luxury goods, cars and assembling parts are likely weak.