Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 282

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 282
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 consensus economic forecasting process. Scenarios produced to calculate ECL are aligned to HSBC’s top and emerging risks. Description of economic scenarios The economic assumptions presented in this section have been formed by HSBC with reference to external forecasts and estimates, specifically for the purpose of calculating ECL. Forecasts may change and remain subject to uncertainty. Outer scenarios are designed to capture the potential crystallisation of key economic and financial risks and alternative paths for economic variables. In our key markets, the Central scenario incorporates potential impacts from anticipated changes to US economic and trade policy, including higher tariffs. The overall effect of the adjustment in our key markets is to lower GDP and raise inflation and unemployment estimates, relative to the consensus. Consequently, GDP growth and unemployment forecasts have deteriorated in the fourth quarter of 2024, compared with the fourth quarter of 2023. With regards to monetary policy, the expected path for interest rates in many of our markets is based on market futures. Interest rate expectations have increased relative to the fourth quarter of 2023, with fewer rate cuts forecast. The exception is mainland China, where the headwinds to growth ensure that forecast interest rates are lower. At the end of 2024, risks to the economic outlook included a number of significant geopolitical issues. Within our Downside scenarios, the economic consequences from the crystallisation of those risks were captured by higher commodity and goods prices, the re-acceleration of inflation, a further rise in interest rates and a global recession. The scenarios used to calculate ECL are described below. The consensus Central scenario HSBC’s Central scenario reflects expectations for slower growth and higher inflation and unemployment across many of our key markets. Expectations of lower GDP growth during 2025 are driven by the assumed effects of higher tariffs, which impede trade flows, weaken consumption and deter investment. In the scenario, the US applies tariffs on key trading partners, focusing on mainland China and Mexico at the outset of the new administration’s term, before moving attention to other trading partners. Countries are expected to respond in kind. As a direct consequence of tariffs, trade growth is expected to be lower, which in turn weighs on GDP growth. Mainland China, Hong Kong and Mexico experience the greatest negative consequences given their deeper trade and financial interlinkages, with the US economy. Indirect consequences from tariffs dampen growth elsewhere. Tariffs, or the threat of them, increases uncertainty, leading to lower confidence and reduced investment. Tighter restrictions on immigration into the US are also expected to reduce the size of the