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Hong Kong To Record Strong Growth This Year On Domestic Demand: IMF

Hong Kong's economy is set to remain resilient to the effects of global uncertainties, and will record strong growth this year, helped mainly by strong domestic demand, an yearly report from the International Monetary Fund (IMF) said Friday.

The IMF forecasts that the Hong Kong Special Administrative Region (SAR) will expand at a faster rate of 3 percent this year than the projected 1.25 percent in 2012, helped by strong domestic demand, and the gathering momentum of the Mainland economy.

Appropriate macro-prudential policies, including tighter ceilings on mortgage loan-to-value ratios, have helped protect Hong Kong's financial stability by strengthening lending standards and boosting bank buffers, the report said.

At the same time, fiscal policy support, strong construction activity, and buoyant tourism have helped offset the drag from weak external demand.

The Fund, meanwhile, warned that the city's property sector poses the main domestic risk to outlook, while the euro crisis and U.S. fiscal negotiations, remain the external risks. IMF sees a low probability, in the near term, of a correction in the property sector that is significant enough to have broad macroeconomic and financial repercussions.

The report also cautioned that external bank distress, particularly shocks originating in the United States or Mainland China, would have a large impact on Hong Kong's banking system.

The high degree of economic flexibility and importance of skilled occupations in the city's economy, while sources of strength and resilience, could also result in growing income inequality.

"Trade and financial services are key sectors in Hong Kong SAR, which leaves the economy susceptible to global and regional shocks," IMF's mission chief Steven Barnett said.

"In the event of an external shock, fiscal policy should provide further stimulus while protecting low-income and vulnerable households."

by RTT Staff Writer

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