Hong Kong’s accountants see a bleak outlook for the local economy as the city grapples with a recession caused by six months of increasingly violent protests, a slowing global economy and the US-China trade war.
Two thirds of accounting professionals surveyed by CPA Australia expect Hong Kong’s economy to contract in 2020, as the recession that began in the last quarter continues.
That represents a huge slump in economic confidence among respondents. This time last year just a fifth of those surveyed had expected a contraction, while a year before that only 4 per cent foresaw recession, according to a report by CPA Australia released on Sunday.
The accounting body surveyed 207 of its Hong Kong members between October 8 and November 1, and released its report on Sunday.
Almost three quarters of respondents think the Asian city’s competitiveness will decline, up 25 percentage points from 2019.
“There is no doubt that external and local uncertainties are making our respondents anxious over the economic outlook,” said Roy Lo, divisional president for Greater China at CPA Australia. “The slowing global economy, the US-led trade war, and lower economic growth in mainland China are negatively impacting Hong Kong’s economy, with the continuing social unrest making a tough situation worse.”
Hong Kong officially slipped into a technical recession in the third quarter as the economy shrank 3.2 per cent from the prior quarter, according to the Census and Statistics Department. A government spokesperson at the time said the city’s economic growth had deteriorated abruptly because of the social unrest that has gripped the city since early June.
Tourists are avoiding Hong Kong and consumers are staying home, causing some restaurants and retailers to shut down because of a lack of business.
Third-quarter gross domestic product, meanwhile, shrank 2.9 per cent year on year, the biggest contraction in a decade.
According to CPA, 43 per cent of the city’s accountants think Hong Kong’s GDP will decline by more than 1 per cent next year. That is a huge shift from expectations of a 2 to 2.9 per cent expansion in the past two years.
In a bid to cope with the tough business environment, 30 per cent of respondents expect their companies to reduce headcount, double the 15 per cent in last year’s survey, and half think “cost management” will be a key focus in 2020, indicating a more prudent mindset.
“To rebuild Hong Kong’s business confidence and competitiveness, CPA Australia urges the government to take actions to enhance Hong Kong’s position as an international financial centre,” said Lo. He suggested a continued push for fintech development and the introduction of more targeted tax incentives would help achieve this.
Investing in innovation and technology will be key to strong long-term growth, according to a third of respondents in this year’s survey.
“Technological advances will not stop disrupting traditional industries and transforming business models, regardless of the slowing global economy,” said Lo. “Businesses should at least keep up with technological trends to cater to changing customer needs, new regulations and new industry practices.”
Of the ‘Big Four’ accounting firms, Deloitte China, PwC and EY declined to comment when approached by the Post, while KPMG did not respond to a request for comment.
More from South China Morning Post:
- Hong Kong eases monetary policy as economy slips into recession, prompting city’s banks to cut rates for the first time in 11 years
- Hong Kong protests: violence and hatred ‘swallowing up’ city and pushing it to brink of worst recession since 1997 handover, finance chief Paul Chan warns
This article Hong Kong’s battered economy will continue to shrink next year, says CPA Australia survey of accountants first appeared on South China Morning Post