For Immediate Release
The Hong Kong General Chamber of Commerce forecasts real economic growth to be in the 2.5 – 3.5% range for 2018, while inflation will pick up slightly to 1.5 – 2.5%.
“Domestic demand is expected to continue as the key driver of growth for Hong Kong’s economy in 2018, which is a reflection of the lingering uncertainty affecting the external business environment,” HKGCC Chairman Stephen Ng said.
The tight labour market, full employment and the consequential positive wage growth should continue to be key drivers of domestic demand. In addition, “the new Administration is expected to adopt a more liberal fiscal approach, and the increased spending on innovation, education and construction activities should further buoy Hong Kong’s economy,” said HKGCC’s Senior Economist Rocky Tung. “Although the cost of borrowing in Hong Kong may see some upward pressure in 2018, its negative impact on the economy should be neutralised by the better business and consumer sentiment.”
The results of the Chamber’s Business Prospects Survey showed companies were more optimistic about the economy’s prospects than in previous years. A total of 63% of respondents expect Hong Kong’s GDP growth to be 2-4% for the coming year (see Chart 1), while 27% of respondents expect growth to be in the 0-2% range.
Their optimism is reflected in hiring intentions, with 61% of respondents saying that they plan to hire more staff in Hong Kong in the coming 12 months, compared to 44% in last year’s survey (see Chart 2).
“With more companies foreseeing growth, one roadblock to that might be the acute labour shortage. In our survey, 70% of businesses said labour and skills availability were having a major impact on our competitiveness, which is higher than last year (67%) despite the measures implemented in recent years. We need to resolve the issue of the tight labour market conditions, which not only hamstring growth, and result in delays, but also raise the cost of doing business,” said Ng.
In fact, 83% of respondents cited the cost of doing business as a major concern impacting Hong Kong’s competitiveness, up from 77% in last year’s survey. The lack of long-term government planning (80%), and political development or sentiment (74%) were the other top issues expected to impact the city’s competitiveness in the next three to five years.
Chamber CEO Shirley Yuen said around half of respondents (51%) considered that Hong Kong’s competitiveness had deteriorated over the past 12 months. “The number is a cause for worry, but compared to the 73% registered in the 2016 survey (see Chart 3), we are moving in the right direction, but we still have a lot of catching up to do.”
The survey showed respondents felt key Mainland cities were closing the competitiveness gap against us. “We need to work harder and faster on improving the business environment, strengthening our competitiveness, and expanding our skills and talent pool,” said Ng.
More optimism was also seen in the Belt and Road’s potential (see Chart 4). To capitalize on the opportunities that these new markets may offer, however, the Government and business sector should actively work together to help companies understand and break into these new areas of growth.
Technology and innovation were also flagged as the least satisfactory aspects of Hong Kong’s business environment. On the other end of the spectrum, a large majority ranked the legal system and tax regime as satisfactory (see Table 1).
“The survey has identified where we are making some progress, and also highlighted areas where we definitely need to put more effort into addressing, not least, costs, labour shortages and government planning,” added Ng. “The Chamber will be making more recommendations to the Government on how we can reinforce our strengths and beef up our weaknesses.”
About the survey: The Hong Kong General Chamber of Commerce’s Business Prospects Survey was conducted between 3 October and 3 November. A total of 331 questionnaires were returned.
Charts for the survey can be downloaded here.
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Media inquiries: Please contact Mr Ray Lai at 2823-1297 / [email protected]