The new year is usually a good opportunity for businesses to draw up plans for the next 12 months, from assessing the general economic outlook to making key decisions about investment, expansion and recruitment. But planning ahead remains difficult at present, with the emergence of the Omicrom variant continuing the pandemic-related uncertainty.
However, as we look to the year ahead, we can also see reasons for optimism for Hong Kong businesses. In our economic forecast for 2022, the Chamber forecast real GDP growth of 2.8%.
While many other economies around the world have continued to swing in and out of lockdown situations, restricting business operations at short notice, Hong Kong has avoided this upheaval for much of the past year. With virtually no local Covid cases for many months and a peaceful local environment, our economy has been able to recover. Assuming this situation continues, we expect Hong Kong to see moderate growth.
The stable environment has also helped the jobs situation, and we anticipate the city’s unemployment rate will continue to drop to 3.7% by the end of the year. This is good news for citizens and also for local businesses that depend on consumer spending and sentiment.
Looking at the global economy, one area of concern is inflation, particularly in Western economies where costs for consumers rose rapidly during 2021. In November, inflation reached 6.8% in the United States, and in the United Kingdom it hit 5.1%, the highest level in more than a decade. Hong Kong has not seen the same issues, but the Chamber expects the city’s headline inflation rate to rise from 1.5% in 2021 to 2.2% in 2022.
As the Omicron variant could further disrupt supply chains that are already under strain, having a knock-on effect on prices, businesses would be advised to pay attention to the global inflation picture.
Key to a fuller recovery will, of course, be the reopening of the border. Our city’s fortunes are strongly driven by our links with the Mainland and many of our members are involved in cross-border business.
At the time of writing, around 400,000 people had signed up for the Health Code app in advance of the planned reopening of the border. If the launch runs smoothly, we hope the quota will be expanded so businesses can really get back on track.
There is no doubt that these have been a challenging few years for the Hong Kong business community, and the ongoing uncertainty means it is still difficult to predict the likely path of our economy.
But we hope that the gradual recovery we have seen over the past year will continue, and that 2022 will end on a brighter note. To conclude, I’d like to take this opportunity to wish all of our members a Happy New Year and a peaceful and prosperous 2022.