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The Grant Thornton International Business Report 2011 reveals that privately held businesses in almost all countries are more optimistic about economic prospects for the year ahead. Optimism amongst businesses globally has risen from +24 percent in 2010 to +28 percent.

Businesses in Hong Kong are marginally less optimistic about prospects for 2011; their optimism/pessimism balance is +57 per cent compared to +64 per cent in 2010. This is well above the Asia-Pacific average of +11 per cent.

The IBR survey tells us that privately held businesses (PHBs) in Hong Kong are more optimistic as regards the outlook for the economy than businesses globally and across Asia-Pacific as a whole.

Revenue and profitability expectations are higher than last year, but the availability of a skilled workforce remains a major constraint on potential expansion.

Looking ahead, the Hong Kong economy is expected to expand by 5.4 percent in 2011, before slowing to grow at 4.3 percent p.a. in the period 2012-16 as the territory’s capacity to accommodate Mainland tourists and demand for its financial and professional service exports to other cities in mainland China become more restricted.

Export growth is expected to match that of imports over the short to medium term at around 8 percent per annum leaving the current account in surplus.

The inflation rate is expected to average 4.8 percent in 2011 before falling back to 3.3 percent in 2012 as food price inflation slows. The upside risk is that prices continue to rise in mainland China which supplies the territory with most of its food.

With the US Federal Reserve indicating that loose monetary policy will continue into 2013, the value of the Hong Kong dollar, which is pegged to the US$, is likely to be eroded further.

As Chinese companies continue to emerge onto the world stage, IPO-related activities will further boost growth in the economy’s high-value services sector, especially professional, financial and insurance services. Hong Kong will strengthen its status as a regional financial centre as FDI-targeting mainland Chinese companies generate healthy income flows from fees and commissions paid in the city.

Meanwhile, businesses in India and Chile are once again the most optimistic globally, topping the league table of optimism with +91 percent. They are followed by the Philippines (+85 percent), Sweden (+81 percent) and the United Arab Emirates (+80 percent).

Japan is the least optimistic country once more with a balance of -66 percent, followed by Spain (-48 percent) and Greece (-45 percent).

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