S&P affirms Hong Kong 'AA+/A-1+' Ratings, Outlook Stable

June 26, 2020

HONG KONG - S&P Global Ratings today affirmed its 'AA+' long-term and 'A-1+' short-term issuer credit ratings on Hong Kong., and said the outlook remains stable,  reflecting the agency's expectation that Hong Kong's strong economic and financial metrics will allow the Government's creditworthiness to withstand fallout from prolonged social tensions and the COVID-19 pandemic over the next one to two years.

S&P said the ratings also reflected its expectation that institutional changes as a result of impending national security legislation would not affect Hong Kong's autonomy in setting economic policies as laid out in Hong Kong's Basic Law.

"We also do not expect any changes to trade relations between the U.S. and Hong Kong to seriously jeopardise the territory's financial sector development and economic growth," S&P said.

The agency said it could lower its ratings due to a number of factors -- such as events that affected Hong Kong's economic stability or policy predictability.

"We could also consider a downgrade if a prolonged economic slowdown results in much weaker fiscal profiles than we are currently projecting."

S&P said it could consider an upgrade if Hong Kong's policy environment improved materially as social stability was restored and the central government's credit standing improved.

Hong Kong's economy had been battered by COVID-19 amid uncertainty over U.S. and China policies, S&P said, adding that it expected a significant economic contraction in 2020.

"Uncertainty from the implementation of the national security legislation and potential U.S. sanctions on Hong Kong will likely further weigh on investment decisions and economic prospects," it said.

"We now expect Hong Kong's economy to grow at a slower pace in the next two to three years than we previously projected."

It says Hong Kong's fiscal deficit will likely widen to 9.8% of GDP, due to measures to support the economy through COVID-19 remaining elevated over the forecast period.

www.standardandpoors.com (ATI).