A recent survey conducted by the Productivity Council has revealed that small and medium-sized enterprises (SMEs) in Hong Kong are facing challenges due to the high interest rate environment. The survey, which included 814 local businesses, found that 56 percent of respondents believed that high interest rates were impacting consumer spending. Industries such as retail, accommodation and food services, and real estate were particularly affected.
Additionally, about one-third of the SMEs interviewed reported cash flow or supply chain issues as a result of high interest rates. The overall business sentiment among SMEs was described as cautious, with the Standard Chartered Hong Kong SME Leading Business Index dropping to 42.5 points from 47.3 in the previous quarter. This decline in confidence was observed across most industries, with real estate showing the lowest score.
Lawrence Cheung, the chief innovation officer at the Productivity Council, highlighted that the survey results indicated a lack of confidence among SMEs, both in terms of external uncertainties and domestic economic performance. Kelvin Lau, a senior economist at Standard Chartered, pointed out that global economic factors, such as the upcoming US elections and China’s recent macro data weakness, were contributing to the subdued business outlook.
Despite these challenges, Lau mentioned some positive developments, such as the potential for interest rate cuts by the US Federal Reserve. He predicted that there could be a total of 75 basis points cuts by the end of the year, with more cuts possible in the following year. These rate cuts could provide relief to Hong Kong SMEs, especially those in the real estate and accommodation and food services sectors.
In conclusion, the survey results reflect the impact of high interest rates on SMEs in Hong Kong, with concerns about consumer spending, cash flow, and overall business confidence. While external uncertainties continue to pose challenges, the potential for interest rate cuts offers a glimmer of hope for local businesses. SMEs will need to navigate these challenges strategically to maintain their resilience and adaptability in the face of economic fluctuations.
