The Hong Kong Special Administrative Region needs to calibrate macroeconomic policies carefully to secure new growth drivers and address structural challenges, experts say, even though the city’s economic recovery has picked up in the past year.

The S&P Global Hong Kong SAR Purchasing Managers’ Index (PMI) rose to 50.4 in May 2026 from 48.6 in April, signaling a renewed expansion in the SAR’s private-sector activity after two consecutive months of contraction. Business activities increased for the first time since March, supported by a modest rise in new orders and a solid rebound in export demand, with purchasing activities expanded at a softer rate while cost pressure remained elevated. Business confidence stayed negative but improved to a three-month high.

ALSO READ: HKSAR raises inflation forecast, maintains GDP growth rate projection

“The pace of economic recovery remains uneven across sectors; externally-oriented and financial sectors have expanded more rapidly than other service sectors,” ASEAN+3 Macroeconomic Research Office (AMRO) said.

The international organization added that uncertainties in the global technology cycle in the near term remain a key risk given Hong Kong’s high degree of global integration, while heightened volatility in global energy and financial markets could also weigh on growth.

Hong Kong’s economy in the first quarter of this year expanded at the fastest pace in almost five years, supported by strong external demand and improved activity in tourism and financial services. Last year, the economy gained 3.6 percent.

“Over the medium- to long-term, population aging and intensifying geo-economic fragmentation will remain key structural challenges. Failure to diversify drivers could make the economy less resilient to fluctuations in global trade and financial services,” the AMRO said.

READ MORE: HK economy posts strongest growth in almost five years

“We expect growth to moderate in the next few quarters due to prolonged uncertainties from (the Middle East) conflict, the resulting risks to growth of key trade partners, and tightening of financial conditions,” S&P Global Ratings said.

The United States-based credit agency added that although Hong Kong’s economy is likely to be relatively more sheltered from the supply impact of energy shock, the city is less insulated to price spikes in the global energy markets.