Title page
Contents
PRESS RELEASE - PR 23/186 2
STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION DISCUSSIONS 6
CONTEXT: COPING WITH NEW CHALLENGES 9
NAVIGATING THROUGH GLOBAL HEADWINDS 9
A. Emerging from the Pandemic 9
B. Sailing into Headwinds 13
FOSTERING A RESILIENT AND INCLUSIVE RECOVERY 16
A. Underwriting a Resilient Recovery 16
B. Unwinding Exceptional Financial Support 18
SAFEGUARDING FINANCIAL STABILITY 19
A. Maintaining the Financial System's Resilience 19
B. Facilitating Orderly Adjustment of Housing Market 22
C. Further Enhancing Financial Sector Oversight 24
BOLSTERING LONG-TERM GROWTH PROSPECTS 27
A. Fortifying the International Financial Center Status 27
B. Building New Growth Drivers 29
STAFF APPRAISAL 30
Appendix I. External Sector Assessment 46
Appendix II. Risk Assessment Matrix 48
Appendix III. Summary of Property Market Measures Introduced Since 2009 49
Appendix IV. Debt Sustainability Analysis 54
Appendix V. Updates on Implementation of FSAP Recommendations 62
STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION DISCUSSIONS-INFORMATIONAL ANNEX 77
FUND RELATIONS 78
STATISTICAL ISSUES 79
STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION DISCUSSIONS 8
Text Table 1. Key Fiscal Policy Responses to the COVID-19 10
Table 1. Hong Kong SAR: Selected Economic and Financial Indicators, 2018-28 41
Table 2. Hong Kong SAR: Balance of Payments, 2018-28 42
Table 3. Hong Kong SAR: Consolidated Government Account, 2018-28 43
Table 4. Hong Kong SAR: Monetary Survey, 2018-23 44
Table 5. Hong Kong SAR: Financial Soundness Indicators, 2018-22 45
STAFF REPORT FOR THE 2023 ARTICLE IV CONSULTATION DISCUSSIONS-INFORMATIONAL ANNEX 80
Table 1. Hong Kong SAR: Common Indicators Required for Surveillance 80
Figure 1. Hong Kong SAR: Large Economic Setback in 2022 Due to COVID Outbreaks 34
Figure 2. Hong Kong SAR: Another Large Fiscal Stimulus in 2022 35
Figure 3. Hong Kong SAR: The Banking System Remains Strong with Large Buffers 36
Figure 4. Hong Kong SAR: Private Sector Indebtedness Remains Elevated 37
Figure 5. Hong Kong SAR: Financial Stability Is Preserved Despite Housing Market Correction 38
Figure 6. Hong Kong SAR: Linked Exchange Rate System Continues to Function Smoothly 39
Figure 7. Hong Kong SAR: Financial Linkages with Mainland China Continue to Deepen 40
Boxes
Box 1. Project mBridge: Using CBDCs to Enhance Cross-Border Payments 32
Box 2. Hong Kong SAR's Regulatory Approach to Virtual Assets 33
Appendix IV. Figure 1. Hong Kong SAR: Risk of Sovereign Stress 54
Appendix IV. Figure 2. Hong Kong SAR: Debt Coverage and Disclosures 55
Appendix IV. Figure 3. Hong Kong SAR: Public Debt Structure Indicators 56
Appendix IV. Figure 4. Hong Kong SAR: Baseline Scenario 57
Appendix IV. Figure 5. Hong Kong SAR: Realism of Baseline Assumptions 58
Appendix IV. Figure 6. Hong Kong SAR: Medium-term Risk Assessment 59
Appendix IV. Figure 7. Hong Kong SAR: Long-term Risk Analysis 60