In view of the upside surprise from the 4Q 2016 GDP print, BofA Merrill Lynch revised up 2017 and 2018 GDP growth forecast to 2.5% and 2.7% yoy, respectively (versus 1.7% and 2% yoy previously).
Moreover, taking into account of the one-off relief measures announced at yesterday's Budget Speech, the research house adjusted its 2017 headline CPI inflation forecast to 1.9% yoy (versus 2.6% yoy previously) and maintained its 2018 CPI inflation forecast at 2.9% yoy.
BofAML believes economic growth this year will continue to be underpinned by solid private consumption growth amid resilient labor market conditions and expected stable property prices.
In addition, it believes relative stabilization in external demand should help support regional trade flows and HK's exports.
However, HKD strength on potentially stronger USD and a faster-than-expected Fed rate cycle could pose downside risks to Hong Kong's economic growth.
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