Company: HBCYF
Filing Date: 2025-10-28
Form Type: 6-K
Source: 0001089113-25-000056
Chunk: 43

Company: HSBC HOLDINGS PLC
Filing Date: 2025-10-28
Form: 6-K
Chunk 43
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 and emerging risks. Description of economic scenarios The Central scenario reflects the expectation of lower average GDP growth in the US, UK and other key markets in 2025–2026, relative to the fourth quarter of 2024. The weaker outlook incorporates the impact of higher US tariff rates and increased policy uncertainty on future global trade volumes, investment spending and employment. The scenario is consistent with a US tariff rate, measured as an effective trade-weighted average, of 18% at the end of 2025. It includes the higher reciprocal tariff rates that were implemented following the end of the temporary pause in the third quarter of 2025, the suspension of higher tariff rates with mainland China and the trade agreements the US has concluded with key partners. However, forecasts have improved relative to the fourth quarter of 2024 for mainland China and Hong Kong, when projections were weighed down by expectations of a sharper escalation in US tariffs. For the third quarter of 2025, strong fiscal support, more accommodative monetary conditions and ongoing trade redirection have increased confidence that these economies can avoid a significant downturn. Risks to the Central scenario outlook are captured in the outer scenarios. The key sources of forecast risk and uncertainty in the third quarter of 2025 include trade policies and the rates at which future tariffs are levied, geopolitical tensions, inflation and the outlook for monetary policy. Outer scenarios for most markets are configured as demand side shocks, but the approach may vary depending on the risk profile of each country. To the downside, scenarios explore the intensification and crystallisation of key risk themes and are modelled so that economic shocks drive consumption and investment lower and commodity prices fall. For most markets, inflation and interest rates are lower compared with the Central scenario. That narrative is disrupted in the US and Mexico as higher tariff rates and other countermeasures are assumed to drive a broad increase in import prices. In the Upside scenario, stronger economic growth and demand cause a temporary acceleration of inflation. The four global scenarios used for calculating ECL at 30 September 2025 were: – The consensus Central scenario: This scenario features slower global growth in the near term due to greater policy uncertainty, the implementation of higher tariffs as well as underlying structural weakness in some economies, before a gradual improvement over the remainder of the forecast horizon. Unemployment is forecast to rise gradually in many markets amid weaker economic activity and subdued business confidence, but is expected to remain relatively low by historic standards. The evolution of inflation is more mixed by market. In the US and UK, inflation