Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 290

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 290
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 recovery in the Hong Kong residential property market; – the implications of changes to monetary policy expectations on growth and employment; – estimation and forecast uncertainty for UK unemployment given ongoing methodology updates at the Office for National Statistics; and – risks of an asset price correction given elevated valuations across different asset classes. Although these factors are significant, management assessed that following the tariff-based adjustment, the Central scenario reflected the most likely future economic outcome and that outer scenarios were sufficiently well calibrated to address the crystallisation of more severe risks. This led management to assign scenario probabilities that are aligned to the standard scenario probability calibration framework in all major markets. The Central scenario was assigned a 75% probability weighting in our major markets. The consensus Upside scenario was assigned a 10% weighting, and the consensus Downside scenario was given 10% . The Downside 2 was assigned a 5% weighting. In support of the decision, it was noted that the effect of higher tariffs would be most negative in mainland China and Hong Kong, as it would limit trade growth (a significant growth driver in 2024) substantially and lead to weaker domestic demand. The adjustment to the Central scenario reflected this assumption. In the UK, tariffs have a small direct impact on GDP growth forecasts in the Central scenario, but indirect effects would be larger through weaker trade and lower global growth. The outlook also remains weak given the only partially offsetting impacts from measures announced in the 2024-25 Budget and higher US interest rates. For the US, the Central scenario reflects expectations that economic growth will slow in 2025 as households and businesses adjust to higher inflation, lower labour supply and elevated interest rates.

| HSBC Holdings plcAnnual Report on Form 20-F | 185 |

The impact from tariffs is minimal for the UAE, as trade with the US is small, but it is assumed to be affected through secondary channels, including a stronger US dollar and higher interest rates. It was also observed that geopolitical risks have remained high since the outbreak of conflict in the Middle East, but economic and market impacts have been limited and oil production remains unaffected. Escalation risks were assessed to be consistent with the probabilities assigned to the Downside scenario. Management concluded that Mexico is likely to be one of the most heavily affected countries from US tariff policies and that the impacts are reflected in the scenarios. GDP growth forecasts in the Central scenario are lower than in previous periods, and inflation and interest rates are higher, in part due to an expected deprecation of the Mexican peso. In France, recent domestic