For Immediate Release
The Hong Kong economy is expected to head for a path of slower expansion in 2019, after registering robust growth over the past two years, according to the annual Business Prospects Survey conducted by the Hong Kong General Chamber of Commerce (HKGCC).
76% of respondents said that they expected economic growth to be below 3% in 2019 (Figure 1). While nearly half of the respondents in this group said the economy may expand by 2-2.99%, the rest anticipated growth of less than 2%.
“This downbeat sentiment from our members is an alarming sign for Hong Kong as our members employ about one-third of the workforce in the city,” said HKGCC Chairman Aron Harilela.
When asked about their expectations about revenue in the next 12 months, respondents from the transport and logistics, manufacturing, and trading sectors were relatively pessimistic, reflecting their worries about the impact of the China-U.S. trade war. In particular, 35% of the respondents from the transport and logistics sector said that they expected to see a drop in revenue. (Figure 2).
Apart from the trade war, the pace of local interest rate normalization is also adding uncertainty to our economic prospects. This uncertainty was, in fact, cited as one of the major challenges facing businesses, along with rising operating costs, industry competition and talent availability (Figure 3).
Compared to last year, companies have become more cautious about expanding their businesses in Hong Kong in the near term. 51% of respondents said that they planned to hire more staff in the city, compared to 61% last year (Figure 4); and only 33% reported that they planned to make additional capital investment, down from 48% last year (Figure 5).
“Despite the fact that Hong Kong’s economic momentum may have started to slow, we are not surprised that roughly half of our survey respondents are still planning to hire more staff, given that manpower shortages exist in a wide range of sectors amid a very tight labour market,” said Harilela.
In terms of Hong Kong’s competitiveness, respondents were more satisfied with the city’s traditional advantages such as flow of information, legal system, tax regime and physical infrastructure (Figure 6). Chamber CEO Shirley Yuen said that these strengths propel Hong Kong to a unique position that ensures we can play a prime role in the Greater Bay Area development.
“The recent opening of the Hong Kong-Zhuhai-Macao Bridge and the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link have strengthened Hong Kong’s role as a ‘super-connector’ and further enhanced our appeal as a vibrant city,” Harilela added.
On the other hand, respondents saw room for improvement in the cost of doing business, and innovation and technology.
“The Chamber has been working on ways to tackle these challenges in recent years,” said Yuen. “The results of our survey will further encourage our efforts in calling for the removal of bottlenecks in the three key areas of regulation, land and labour.”
The Chamber’s Senior Economist Wilson Chong said the unfavourable global trade environment and higher interest rates would likely drag Hong Kong’s economic growth down next year. “Trade activities have been resilient so far this year because of front-loading of shipments,” said Chong. “However, this distortion is expected to add pressure to next year’s trade figures.”
Amid the economic headwinds, the Chamber forecasts real GDP growth to be in the range of 2.0 – 2.5% for 2019, while inflation is expected to lie between 1.5 – 2.5%.
About the survey: The Hong Kong General Chamber of Commerce’s Business Prospects Survey received a total of 460 responses, of which 24% came from professional and business services sector, and 14% from both the financial services sector and trading sector.
Charts for the survey can be downloaded here.
Media inquiries: Please contact Ms Kari Yu at 2823-1266 / [email protected]