With the Year of the Dragon almost upon us, Hong Kong is still labouring to shore up the economy as it seeks to regain pre-pandemic levels of growth. The removal of all Covid restrictions early in 2023 had an extremely positive effect on the economy, which picked up strongly. But external headwinds have continued to put a dampener on business and consumer sentiment over the short term.
The Chamber’s latest Business Forecast Survey showed that Hong Kong firms are cautiously optimistic about their turnover next year – 37% of the 200 companies polled believe it will get better, about 20% expect a decrease, while some 43% forecast it will stay about the same.
In the face of prevailing uncertainties like weak demand, international conflicts and high interest rates, the Chamber expects growth to slow down next year with an estimated rate of 2.9%, down from 3.3% in 2023. However, we must keep in mind that the survey was conducted before the notable warming in China-U.S. relations during the APEC summit, which could buoy up business sentiment.
Financial Secretary Paul Chan, who will reveal his 2024 Budget next month, has said that even though not much can be done to mitigate external risk factors, the Government is pulling out all the stops to regrow the economy by attracting international professionals and companies through special schemes and initiatives.
Meanwhile, bigger firms continue to worry about the brain drain, which has had a crushing effect on the labour market these past few years, while SMEs are concerned about inflationary issues. Such sentiments have impacted hiring, with 31% of respondents planning to recruit more staff, down from last year’s 34%. Nearly half want to maintain their headcount, while 11% plan to reduce their staff numbers.
Hong Kong is also grappling with a paradigm shift in post-pandemic consumer habits, such as travelling abroad during holidays. Chief Executive John Lee has vowed to explore ways to encourage local spending, on the heels of the multi-pronged “Happy Hong Kong” campaign to invigorate the economy. Revenge consumption has also dropped, and coupled with high interest rates, points to slower retail sales growth next year. The Chamber estimates retail sales will grow by 5.3% in 2024, a rather steep drop from the 15.3% growth in 2023.
On the brighter side, Hong Kong enterprises revealed a positive forecast on the economic juggernaut that is the Greater Bay Area. Among respondents already conducting business in the region, nearly half want to increase investment over the next 12 months, up from 34% last year, while 32% are considering expansion.
As the Government doubles down on efforts to revive the economy, Hong Kong must remain fired up in the Year of Dragon, and continue to chase growth with its inherent strength and resilience as a leading financial hub.
Patrick Yeung
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