Hong Kong Economic Outlook 2015: Bumpy Road Ahead
		The stability of global growth in aggregate masks the fact that growth divergence between the US and much of the rest of the world has been widening. We are not convinced that the US economy is resilient enough to build the strong base needed for global trade to accelerate more meaningfully. We therefore expect Hong Kong export growth in 2015 to remain broadly in line with this year and come in at around 5%.
		Domestically, our analysis suggests that the rapid growth in private consumption over the past few years can largely be explained by (1) the positive wealth effect being passed on to the consumer, and (2) easier access to credit. Neither of these two drivers is likely to sustain.
		However, while we argue that consumption has been expanding too fast and is becoming unsustainable, we are not anticipating a sharp downturn. Continued real wage gains and the low degree of income uncertainty will keep consumption on course for growth.
		Another hot debated issue is whether a highly leveraged economy like Hong Kong can handle higher interest rates. We believe the coming rate shock is manageable for three reasons: (1) there has been enough forward guidance from the Fed to reduce policy uncertainty; (2) domestic household balance sheets still look healthy in aggregate; and (3) non-rate factors are more important.
		We forecast that 2015 GDP growth will come in at 2.6% – a modest increase from the 2.1% growth forecast for 2014. With the economy operating well below its potential level, the unemployment rate is expected to move a tad higher to 3.5% in 2015.