People walk through a shopping district in Hong Kong on Dec 22, 2022. (ISAAC LAWRENCE / AFP)

Hong Kong’s economy is expected to see an upturn this year, mainly driven by a retail boost, following the resumption of quarantine-free travel between the special administrative region and the Chinese mainland, DBS Bank economist Samuel Tse said on Tuesday.

“Before the pandemic, tourist spending accounted for 30 to 40 percent of Hong Kong’s retail sales, and 80 percent of visitors were from the Chinese mainland,” he said. “The contraction of retail sales will reverse after the resumption of normal travel.”

Samuel Tse said the easing of anti-pandemic measures is bullish for the city’s exports, but potential economic recession in the US and Europe may still slow down the pace of recovery

His remarks came after DBS Bank last week set its full-year forecast for Hong Kong’s GDP growth at 3.8 percent, echoing the resumption of quarantine-free cross-boundary travel.

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As of Jan 8, a daily quota of 60,000 is set for people to travel in both directions between the SAR and the mainland via seven control points. Travelers are not required to be quarantined, but need to provide a negative COVID-19 test result taken within 48 hours of departure.

Financial Secretary Paul Chan Mo-po said in his Sunday blog he’s optimistic about Hong Kong’s prospects, and expects the resumption of normal travel to give great impetus to the city’s export, tourism, retail, catering and other industries.

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Tse said the easing of anti-pandemic measures is bullish for the city’s exports, but potential economic recession in the US and Europe may still slow down the pace of recovery.

He said the SAR’s capital outflow is manageable, with deposits floating from the Hong Kong dollar to the US dollar amid rate hikes, while a relatively stronger growth outlook for the country and Hong Kong will also attract capital inflow.

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Nevertheless, Tse described Hong Kong’s shrinking labor force as a “structural issue” in the local economy, noting that the city’s working population is now 175,900 less than that at the end of 2019.

“Talent outflow is mainly seen in highly-skilled sectors, such as financing, insurance and professional services,” he added.

evanliu@chinadailyhk.com