Hang Seng Bank has raised its 2026 Hong Kong economic growth forecast to 3.1% from 2.5%, citing expected improvements in both domestic demand and external conditions, according to a Monday report.

The bank said the city's fiscal balance is likely to remain positive over the next five years, including net proceeds from government bond issuance.

While the operating account is expected to stay in surplus, the capital account will likely remain in deficit due to planned spending, particularly on the Northern Metropolis development.

Volatility in land premiums, a key source of government revenue, remains a structural challenge, with bond issuance needs closely tied to property market performance, the bank said.