The Productivity Council on Tuesday warned that tough cross-border restrictions are still weighing on small and medium-sized enterprises (SMEs), despite rising optimism over the easing of social distancing measures and another handout of consumption vouchers.

According to a council survey conducted in June and July this year, 77 percent of the 921 local businesses interviewed said they were impacted by travel curbs.

Of those affected, around two-thirds said travel restrictions with both the mainland and the rest of the world had hindered their business, with the most affected industries being import and export trade and wholesale, construction, and retail.

Yet, the council said business sentiment increased sharply in the third quarter, with the latest Standard Chartered Hong Kong SME Leading Business Index recording its largest jump ever in confidence to 47.1 points, up from 35.7 in the previous quarter.

The council's chief digital officer, Edmond Lai, said the rebound indicates that Hong Kong SMEs have almost overcome all the negative impacts of the fifth Covid wave, but added that the strict travel rules in place would continue to take a toll on local businesses.

Meanwhile, senior economist Kelvin Lau from Standard Chartered, which sponsored the survey, pointed to relatively weak confidence among SMEs in the global economy, as he remained cautious of external headwinds.

"Going forward, the number one concern for a lot of Hong Kong SMEs will continue to be the external backdrop, whether we are seeing a slowdown in global growth, global demand, and that puts a lot of those externally oriented industries in a slightly less comfortable position," he said.

With Financial Secretary Paul Chan warning in an SCMP interview that the government could downgrade its annual growth forecast again in just three months from the current one to two percent, Lau said Standard Chartered puts the figure even lower, at just 0.2 percent.

"We are sticking to a relatively cautious recovery view for the Hong Kong economy. We are still expecting a better second half, compared to the first half, led by domestic recovery. But then, because of the external uncertainties lingering, we believe that the ceiling for recovery would be low," Lau said.