Company: HBCYF
Filing Date: 2025-04-29
Form Type: 6-K
Source: 0001654954-25-004763
Chunk: 46

Company: HSBC HOLDINGS PLC
Filing Date: 2025-04-29
Form: 6-K
Chunk 46
---
 entire range of economic outcomes. The fourth scenario, the Downside 2, represents management's view of severe downside risks.

For the first quarter of 2025, scenarios were constructed using our standard methodology and an adjustment applied to the Central scenario, consistent with the approach taken in the fourth quarter of 2024. Outer scenarios were adjusted in parallel. The adjustment updated forecasts with the latest changes to US tariff policy at that time and incorporated additional assumptions around future tariff rates and policies. Consensus forecasts were assessed to lag these developments. To quantify the impact, the adjustment reduced GDP growth in the most negatively impacted markets by an average of 40bps in the first year of the Central scenario, and by another 20bps in the second year of the forecast.

As in the fourth quarter of 2024 , the adjustment was based on a modelled update to the Central scenario and incorporated a detailed narrative of US trade policy proposals, including specific tariff rates. The results were then layered onto the scenarios, resulting in changes to most variables.

Scenarios produced to calculate ECL are aligned to HSBC's top and emerging risks.

#### Description of economic scenarios
The Central scenario reflects the expectation that higher tariffs applied to the US's trading partners, and reciprocal tariffs announced in turn, will reduce global trade activity and weigh on GDP growth as a consequence. Mainland China, Hong Kong and Mexico are expected to experience the greatest negative direct effects in terms of economic impact, given their deeper trade and financial interlinkages with the US economy. Indirect consequences from tariffs are forecast to reduce growth elsewhere through lower confidence and investment. Alongside the implementation of higher tariffs, economic growth in the US and UK continues to face headwinds from high interest rates and higher price levels. Hong Kong is also suffering from the effects of high interest rates and lower tourist spending, which has weakened domestic consumption. In mainland China, authorities are increasing fiscal support to boost economic activity and ensure that, despite trade headwinds, growth remains close to the official target. In Europe, where manufacturing has been suffering a long period of contraction, a trade war is expected to further weaken growth, and a rise in fiscal spending, which is still uncertain in breadth and scope, may only provide a partial offset.

Given the weaker expected growth outlook, unemployment is also forecast to edge higher in many of our key markets in 2025. The exceptions are Hong Kong and mainland China, where government policies to support employment are expected to ensure unemployment remains stable. Inflation forecasts have risen in several of our