Confidence improves but uncertainty weighs on Hong Kong’s economic outlook

Hong Kong’s economic outlook has improved and is in line for modest growth next year, according to a new survey by one of the world’s largest professional accounting organisations, CPA Australia.

CPA Australia surveyed 214 Hong Kong-based accounting and finance professionals about the local economy. Sixty-seven per cent of respondents indicated they expect Hong Kong’s GDP to grow in 2022. Of those, 52 per cent expect the economy to grow by up to 2.9 per cent, while 15 per cent believe it will grow by 3 per cent or more during the year.

Janssen Chan FCPA (Aust.) CPA Australia Divisional President of Greater China said, “Measures to combat the pandemic and stimulate the local economy, such as the consumption voucher scheme, have bolstered the city’s economic recovery and prospects. Most respondents are cautiously optimistic about Hong Kong’s economic outlook and think the economy will grow at a modest pace.

“However, restrictions on cross-boundary travel and the pandemic remain the top barriers to economic growth nominated by respondents. Despite improvements in overall business and economic sentiment, we should be mindful of the risk of an unequal economic recovery among different industries and the ongoing challenges posed by COVID, such as the emergence of the Omicron variant.”

Fifty-three per cent of respondents predict their company’s revenue will increase next year, with 47 per cent expecting revenue growth of up to 29 per cent. Reflecting a more positive outlook, 36 per cent of respondents report their company will increase staff count in 2022, up from 13 per cent in 2021. Fifty-nine per cent of respondents expect their salary to increase in 2022, compared to only 15 per cent in 2021.

Chan observed, “The survey findings indicate that business confidence in Hong Kong has improved over the past 12 months. Last year, only 26 per cent of respondents expected their company’s revenue to increase in 2021. In contrast, reflecting a better-than-expected recovery, 50 per cent of respondents said revenue will grow this year.

Meanwhile, 78 per cent of respondents expect their company to expand its business activities outside of Hong Kong in the next three years, with Mainland China being the top destination of choice followed by Southeast Asia.

“Strong intentions to expand business activities into other markets is another sign of economic recovery. As an international city, expanding Hong Kong’s economic and trade connections will help accelerate the city’s economic recovery and enhance its competitiveness.

“China recently upgraded its ties with ASEAN to a comprehensive strategic partnership. With ASEAN being Hong Kong’s second largest trading partner, companies in Hong Kong will be eager to seize the markets opportunities from ASEAN economies as well as greater connectivity with other parts of the Greater Bay Area (GBA).”

Six in ten survey respondents think strengthening Hong Kong’s position as an international financial centre will improve the city’s international competitiveness. When asked what measures are needed to achieve this, most respondents chose supporting FinTech and other digital finance innovation, followed by Hong Kong’s status as an offshore renminbi (RMB) centre and attracting and retaining finance talent.

Chan commented, “Greater cooperation with Qianhai to expand the scope of Hong Kong’s offshore RMB product offering will bolster Hong Kong’s position as a leading offshore RMB centre. We also expect the financial integration schemes launched in the GBA this year to boost economic growth in 2022.

The ambiguous timetable for resuming cross-boundary travel and risks of further COVID-19 outbreaks continue to weigh on economic sentiment. Chan said, “While Hong Kong’s economy is recovering, challenges such as the emergence of the Omicron variant continue to present significant uncertainty. Businesses should keep focusing on innovation and technology including digital transformation, attracting, nurturing and retaining talent, and improving business efficiency in 2022 to adapt and thrive in this volatile environment.”

Chan suggested that the government may wish to consider several initiatives to support Hong Kong’s economic growth in 2022.

“One option to support Hong Kong businesses is developing a roadmap to resume cross-boundary travel with fewer restrictions with Mainland China and some ASEAN countries. Other possible initiatives include allocating additional resources to the Branding, Upgrading and Domestic Sales (BUD) Fund and the SME Export Marketing Fund, and signing more free trade agreements and comprehensive double taxation agreements with other economies.”

“Further, we believe the government should consider promoting green and sustainable finance by introducing incentives and regulatory reforms to encourage financial institutions to expand their offerings of green and sustainable funding options, as well as offering more RMB-denominated green financial products.”

Hong Kong Economic and Business Sentiment Report

Hong Kong Economic and Business Sentiment Survey Infographic

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