Although Hong Kong may be on track to record its most impressive economic growth for the past seven years, there’s no guarantee it’s going to be a bed of roses, or that the trend can be indefinitely sustained, economists have warned.

Experts have come up with a litany of concerns that could cast negative spillover effects on the local economy for 2018, topped by growing protectionist sentiment in the United States, an uncertain global trading climate, rising interest rates and the possible downward spiral of property prices in Hong Kong.

Hong Kong’s economy grew 3.9 percent in the first three quarters of last year, underpinned by vibrant external demand supported by benign global economic conditions, and solid domestic demand growth led by brisk private consumption expansion amid the red-hot equity and home markets.

Financial Secretary Paul Chan Mo-po will shed light on the city’s actual economic growth rate for 2017 when he unveils the 2018-19 Budget next month. He had estimated that the SAR’s economy would rise 3.7 percent for 2017 — higher than the mid-point of the 3 to 4 percent range forecast announced in August last year. If this materializes, it would be the city’s fastest economic expansion rate seen since 2011.

Economists project that although Hong Kong is very likely to post its strongest economic growth in 2017, the spectacular growth magnitude will moderate immediately in 2018 due to the high-base comparison, an uncertain global macroeconomic trade environment and the city’s over-heated property sector.

“Economic growth may be sustained, albeit at a slower pace, due to the high-base effect. We’ll also continue to monitor external uncertainties, including the growing protectionist tide that will hit trade activities, and global monetary tightening which may curb private investment,” said Carie Li, an economist at OCBC Wing Hang Bank — a subsidiary of Singapore-based OCBC Bank.

Harboring similar sentiments, Louis Kuijs, head of Asia Economics at think-tank Oxford Economics, warned that slower world trade would hurt Asia more than other regions. “This is because the slowdown will be largely fueled by weaker import growth on the Chinese mainland, which is a particularly important export market for most Asian economies. We expect these headwinds to be especially significant for Hong Kong.”

The Nikkei-Markit Hong Kong Purchasing Managers’ Index, which surveyed purchasing executives from more than 300 companies, rose to 50.7 in November from 50.3 in October. Despite another round of mild improvement in the private sector, the latest reading remained below the historical average.

“A rebound in foreign demand was insufficient to offset softening domestic demand as total new business volumes fell for a second successive month,” said Bernard Aw, principal economist at IHS Markit. “Furthermore, businesses continued to express pessimism over the outlook for the year ahead. Apart from lower sales, companies continued to face an ongoing squeeze on profit margins which will, in turn, dampen employment prospects and capital investment growth.”

Apart from the slowing down of mainland imports, possible trade friction between the Chinese mainland and the United States, due to the passage of the US tax reform bill, may also impede Hong Kong’s export performance this year.

The US House of Representatives and Senate passed the tax cut bill in late December 2017 — the first drastic tax reform in the last three decades. The tax overhaul package, which provided for a cut in the corporate tax rate from 35 percent to 21 percent, plus a 15.5-percent tax rate levy on repatriated cash earnings by US companies, are expected to have far-reaching consequences for global capital and trade flows.

“Cutting taxes when the (US) economy is seeing full employment is likely to suck in more imports to satisfy some of the extra demand. The (US) trade deficit is already running at a 10-year high (and half of that is with the Chinese mainland) and is set to increase. The risk of trade friction seems likely to intensify in the coming year,” cautioned Richard Jerram, chief economist at Bank of Singapore — the private banking arm of OCBC Bank.

Besides the uncertain global trade environment, the over-heated equity and property markets may probably exert negative spillover effects on the Hong Kong economy, and is poised to create greater downside risks.

“There may not be much room for these supportive factors to further improve, given that the local economy is now seeing near full employment and equity prices are already at their highest levels in a decade,” noted Hang Seng Bank Chief Economist Thomas Shik.

Buoyed by low interest rates and excess liquidity, Hong Kong home prices advanced 13 percent in the first 11 months of 2017, according to Rating and Valuation department’s private residential property price index. It had surged 430 percent to record highs since 2003 when the local property sector was buffeted by the Severe Acute Respiratory Syndrome outbreak. While homes prices are swelling, property transactions fell from 18,900 in the second quarter of 2017 to 13,200 in the third quarter last year.

Although the US interest-rate hike in December — the third such increase for 2017 — prompted the Hong Kong Monetary Authority to raise its base lending rate to 1.75 percent, there has been no immediate increase in mortgage loan interest rates in Hong Kong so far. Market analysts, however, expect this to happen in 2018.

“We expect the US Federal Reserve to trim its balance sheet and raise interest rates simultaneously in a gradual fashion, and the Federal Funds Rate target range should hover between 2 percent and 2.25 percent in 2018. Even though Hong Kong is still flush with liquidity, the pressure on local banks to raise the best lending rate in 2018 will go up drastically,” Bank of China (Hong Kong) warned.

“Should Hibor tick up gradually, the secondary housing market is likely to remain suppressed as it relies heavily on bank loans with reference to Hibor, albeit banks may not rush to adjust the prime rate as the market is still flushed with liquidity,” cautioned OCBC Wing Hang Bank’s Li.

“While higher interbank interest rates will weigh on consumer and business credit, the main impact is likely to be a cooling influence on the red-hot property market. Hong Kong’s property market should begin to feel the impact as rising mortgage rates lead to a heavier mortgage debt-servicing burden,” echoed Tommy Wu, senior economist at Oxford Economics.

‘Under the linked exchange rate system, the mortgage burden of Hong Kong borrowers will eventually go up as US interest rates normalize, posing risks to the fragile recovery in consumption and economic sentiment. And, if property prices stall because of slowing demand, the associated wealth effects will be reduced,” said HSBC Greater China Economist Kelvin Lam.