An ACCA Hong Kong survey of 182 members has revealed widespread pessimism about Hong Kong’s likely economic performance in 2021. Only 8% of respondents said they expect good or very good performance, while 59% anticipate poor or very poor performance.
More than half the respondents (53%) believe Hong Kong’s GDP will fall during the course of this year. However, 40% of respondents expect GDP growth of up to 1.99%, and 7% of respondents anticipate growth of 2% or more.
Asked when they thought Hong Kong’s GDP will return to its pre-pandemic level, 16% of respondents said not until the end of 2021. Most thought it would take much longer: 41% said not until 2022, 28% not until 2023, and 15% not until 2024.
The survey identified the most positive influences on Hong Kong’s economy as:
- innovations and digital transformation accelerated by Covid-19 (45%)
- Mainland China’s economic rebound (43%)
- the Greater Bay Area initiative (42%)
The three biggest negative factors for the Hong Kong economy were listed as:
- the Covid-19 pandemic (81%)
- social instability in Hong Kong (59%)
- China-US trade disputes (54%)
Ernest Wong, chairman of ACCA Hong Kong, said: ‘With the Covid-19 pandemic widely affecting the whole world, Hong Kong has been no exception. It is interesting to see that although Covid-19 is ranked top as a major factor negatively affecting the Hong Kong economy, our respondents are at the same time quite positive about the innovations and digital transformation brought by the pandemic.’
In the survey, respondents were asked how they thought their organisation would respond to the changing economic environment in 2021. A headcount freeze or reduction was thought likely by 59%; only 10% said they expect their company to hire more staff this year.
Learning how to apply technologies is especially useful in improving one’s employability, as organisations will need to invest in technologies under the new normal
A scaleback of company investment in staff was also anticipated by 27%, with only 7% expecting companies to continue investing in staff. Investment in technology, though, was expected to continue.
‘With the expectation that organisations might likely freeze or reduce headcount, and lower their investment in staff, employees should always invest in themselves and add value to their own knowledge and skill sets,’ Wong said. ‘Learning how to apply technologies is especially useful in improving one’s employability, as organisations will surely need to invest in technologies under the new normal.’
E-commerce, healthcare and medical, and technology and robotic process automation were viewed as the sectors possessing the best growth potential. Respondents thought that tourism, retail, and hotel and food services will face the biggest challenges in 2021.
Wong said: ‘Given the difficult economic conditions anticipated, we suggest the government extend the period of the employment support scheme and expand the scope of eligibility. Apart from the hardest hit industries, which cannot operate due to the pandemic, we suggest the government include SMEs with revenue below HK$5m [US$650,000].
‘SMEs are the primary pillar of Hong Kong’s economy and workforce. It is important to alleviate their burden and restore their vitality.
Wong urged the government to pay businesses a cash refund of their current year tax loss. This would be calculated by applying the current profits tax rate of 8.25% or 16.5% on the tax loss, capped at the amount of profits tax paid by the same entity in the past one or two years of assessment or HK$165,000, whichever is lower.
‘We consider this only a timing difference instead of a loss of revenue to the HKSAR government,’ Wong explained. ‘This tax refund can significantly improve companies’ cashflow and help keep them afloat in difficult times. This can slow down the closure of healthy businesses, which can also be an effective measure to stabilise and ease unemployment.’
A tax refund can significantly improve companies’ cashflow and help keep them afloat in difficult times, which can also stabilise and ease unemployment
Wong pointed out that strengthening Hong Kong’s position as an international financial centre was crucial for staying competitive. ‘It will be greatly beneficial to expand our international economic and trade connections by proactively seeking to join the Regional Comprehensive Economic Partnership,’ he said. ‘With recent positive news regarding the Covid-19 vaccine availability, we are hopeful that Hong Kong’s economy will recover soon.’
ACCA Hong Kong conducted its member survey between 16 November and 4 December 2020. It attracted 182 respondents, including accounting and finance professionals from diverse industries, age groups and organisation sizes. The survey gauged their expectations and views on Hong Kong’s business and economic outlook for 2021.