Hong Kong businesses expect real economic growth of 2-4% in 2014 and 2015, according to the Business Prospects Survey conducted by the Hong Kong General Chamber of Commerce. The figure is more pessimistic that the Chamber’s own forecast of 4-5% — up from 3.5% for 2013 — but the same as respondents’ predictions last year.
The Chamber’s Chief Economist David O’Rear, said given that data on consumer durables purchases in the U.S. rose on average 6.9% a year for the past three and a half years, he is cautiously optimistic about Hong Kong’s growth. “Hong Kong’s GDP is driven by trade, so with the U.S. doing much better — where it matters for Hong Kong – together with the strong growth of our neighbours, and capital investment is running twice as fast now, I am optimistic about Hong Kong’s growth prospects for the coming year.”
The annual poll reveals an expectation of continued slow, but steady growth over the next two years, with matching inflation. However, some 53.4% of respondents expect to increase wages up to 5%, compared to 46.8% last year, while 20.2% were planning on raising pay by 5-10%. Just under a quarter (23.3%) of employers responding said they would not raise base pay in 2014.
O’Rear believes wage pressures will also add to inflationary pressures. “Inflation is likely to remain above 5% during the coming year, due to extraordinarily low interest rates and wage pressure,” he said.
The steady wage hikes are a reflection of the labour shortage, which is making life difficult for companies in Hong Kong: just under 80% agree that ‘the general increase in labour costs significantly affects operating costs.’
Businesses are also concerned about employees’ overall attitude (a sense of responsibility, loyalty or commitment), according to 63.6% of respondents, followed by English and other non-Chinese languages (60.2%) and a global perspective or multi-cultural sensitivities (55.8%). Technical, functional and Chinese language skills were considerably less of a concern, with 35-42% response rates.
“The survey shows that Hong Kong’s future competitiveness will be driven by the cost of doing business, longer term Government planning, and labour skills and availability,” Chamber CEO Shirley Yuen said.
Political and social issues, the competitiveness of other economies and infrastructure were also ranked as important by businesses, but not as highly. Overall, 60.2% of members think the Hong Kong’s competitiveness deteriorated over the past year, 31.7% think it held steady and the rest saw improvement. Singapore is thought to be a better business and / or financial centre than Hong Kong by 73% of the respondents.
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