Almost half of the surveyed accounting professionals expect that innovations and digital transformation accelerated by Covid-19 will bring positive impact in 2021
An ACCA (the Association of Chartered Certified Accountants) Hong Kong survey, polling 182 members, found respondents are quite pessimistic about Hong Kong's economic performance in 2021. It reveals that only 8% of respondents expect well or very well performance, while 59% respondents expect poor or very poor performance. This shows pessimism and low confidence level on economy outlook.
More than half of respondents (53%) expect a negative GDP (Gross Domestic Product) growth this year. 40% of respondents expect a 0-1.99% GDP growth, while only 7% of respondents expect an over 2% GDP.
When being asked when Hong Kong’s GDP will return to its pre-pandemic level, 16% of respondents anticipate by end of 2021. While 41% of respondents is anticipating ‘not until 2022’, 28% expect ‘not until 2023’, and 15% expect ‘not until 2024’.
The survey uncovered the top factors positively affecting Hong Kong’s economy are: Innovations and digital transformation accelerated by Covid-19 (45%); China’s economic rebound (43%); Greater Bay Area Initiative (42%). While the top three factors negatively affecting the Hong Kong’s economy are: 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 the Covid-19 is ranked top as a major factor negatively affecting HK economy, our respondents are at the same time quite positive about the innovations and digital transformation brought by the pandemic.’
In our survey, respondents were asked what their organisation will consider in response to the changing economic environment in 2021. 59% of respondents said enterprises will have headcount freeze or reduction, and only 10% expect headcount increase. 27% said companies would scale back investment in staff, while only 7% think companies will continue to invest in staff. Yet they will continue to invest in technologies.
Ernest Wong, Chairman of ACCA Hong Kong, said, ‘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. 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.’
In terms of industry sectors, ‘e-commerce’, ‘healthcare and medical’, and ‘technology and robotic process automation’ are seen as holding the most growth potential. While respondents believe ‘tourism’, ‘retail’ and ‘hotel and food services’ will face the biggest challenges in 2021.
Ernest Wong said, ‘Given the difficult economic condition anticipated, we suggest the government to extend the period of employment support scheme (ESS), and expand the scope of eligibility. Apart from the hardest-hit industries which cannot operate due to the pandemic, we suggest the government to include SMEs with employee headcounts, and revenue below HK$5 million. SMEs are the primary pillar of Hong Kong’s economy and workforce. It is important to alleviate their burden and restore their vitality.’
Ernest continued, ‘We recommend a cash refund by the Government of the tax amount in respect of the current year tax loss, calculated by applying the current profits tax rate of 8.25% or 16.5% on the tax loss, but capped at the amount of profits tax paid by the same entity in the last 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. This tax refund can significantly improve companies’ cashflow and help keep them afloat in difficult times. This can slow down healthy business closure, which can also be an effective measure to stabilise and ease unemployment.’
Ernest concluded, ‘It is crucial to strengthen Hong Kong’s position as international financial centre in order to stay competitive. It will be greatly beneficial to expand our international economic and trade connections by proactively seeking to join the Regional Comprehensive Economic Partnership (RCEP). 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 a member survey between 16 November and 4 December 2020 and attracted 182 respondents including accounting and finance professionals from diverse industries, age groups and organisation sizes, to gauge their expectations and views on Hong Kong’s business and economic outlook for 2021.
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