Hong Kong’s economy is expected to grow slightly in 2024, CPA Australia’s latest survey on Hong Kong’s economic and business outlook indicates. The survey results also show anticipated weak demand has led many companies to be more conservative in their 2024 business forecasts and switch to more prudent strategies. Soaring interest rates will continue to weigh on the city’s capital and property markets next year.
Around 49% of surveyed Hong Kong-based accounting and finance professionals expect the city’s economy to keep recovering and growing. Of these people, 36% predict the economy will grow by less than 3%. To boost economic growth and strengthen international competitiveness, respondents were most likely to suggest the government implement measures to attract companies and investment (46%) and strengthen policies to attract and retain talent (30%).
CPA Australia 2023 divisional president of Greater Chin, Robert Lui said “Hong Kong’s economic and business activities have been steadily normalising and recovering this year. Government policies to attract companies, investment and talent are helping Hong Kong return to the world stage.”
He however stressed the challenges ahead, “Cyclical and structural uncertainty in the global market will likely weaken demand. Geopolitical tensions may also slow capital flows and investment activities. Businesses should be cautious as these downside risks may constrain economic growth next year.”
Nearly two-fifths (39%) of respondents expect the total funds raised through Hong Kong initial public offerings (IPOs) in 2024 to increase. High interest rates and weaker outlook is also impacting real estate dynamics, with over half of the respondents forecasting falling property prices next year.
Lui explained, “High interest rates are putting pressure on the capital market and property sector. Sentiment amongst investors and companies on new investment and fundraising remains subdued. We expect that reforms to listing rules, the reduction in stamp duty on stock transfers and the investment immigration scheme should however boost capital market and investor confidence next year.”
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By GlobalData“Rising borrowing costs has hurt real estate globally, resulting in price adjustments including in Hong Kong. The Hong Kong Government has recently announced some favourable measures in the policy address to boost the property market.” Lui added.
Facing economic headwinds, respondents were more conservative in their forecasts for their business. Just 68% expect their company’s revenue to increase or remain largely the same next year, down from 73% in 2023.
The most pressing expected challenge for business in 2024 is weak customer demand. This overtook talent shortage to rank as the top roadblock to business next year. Increasing operational costs is considered the third largest barrier will face.
In response, many companies are shifting to a more prudent strategic focus. Cost management (39%) overtook innovation and digitalisation to be the top strategy for 2024, up from 31% in 2023.
Lui said, “Despite expected weak customer demand, companies must keep innovating to cater for new consumer behaviour. Besides, companies should explore new overseas markets. It’s therefore a good sign that one-third expect to increase sales and marketing activities outside of Hong Kong next year. Further, 39% plan business expansion in mainland China in the next three years, which remains a key contributor to global economic growth. Another 29% chose Southeast Asia as the destination they intend to expand their business. This data shows that many Hong Kong businesses remain global in their outlook, willing to embrace opportunities in new markets.”
“The government should amplify efforts to place Hong Kong as a ‘super value-adder’ through further international collaboration. Hong Kong businesses should leverage government measures such as the BUD fund to build brands and tap into overseas markets such as ASEAN countries.”
Interestingly, hiring intentions have actually increased, especially amongst smaller companies. Thirty-eight% of respondents expect their companies’ headcount to increase, up from 31% in 2023. However, most employees are taking a wait-and-see attitude in their careers. 64% plan to make no change in their job or seek internal promotion, with only 17% planning to change employer.
Pleasingly, only 13% of respondents said their company was not taking any environmental, social and governance (ESG) actions. The ESG practice companies are most likely to prioritise is diversity, equity and inclusion (DEI) programs (28%).
“Talent competition around the world is still fierce. Employers must promote DEI to create a sense of belonging and respect to attract and retain talent in Hong Kong. We also suggest the government take further action to improve the work environment and cultivate an energetic and positive work culture.” Lui concluded.
