The mainland economy is projected to expand robustly over the next two years, led by nonpetroleum exports, while housing investment will slow. Consumption will remain solid on the back of sustained wage and employment growth. Inflation picked up recently, after having remained surprisingly low with respect to cost pressures, but it is not projected to exceed the central bank’s target.
The authorities should continue to target a lower non-oil structural budget deficit than allowed under the fiscal guidelines. House price growth has moderated following the tightening of mortgage lending conditions, but the exposure of households and banks to high debt levels should nonetheless be monitored carefully. As inflation picks up, monetary policy accommodation will need to be gradually withdrawn.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.
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