Financial Secretary Paul Chan said on Sunday that retail sales could improve in the latter part of this year on the back of a weakening Hong Kong dollar.

Writing on his blog, Chan said an expected US interest rate cut may cause the Hong Kong dollar to weaken, making the SAR a more attractive location to spend.

He said upcoming major events should also bring in more tourists, creating a better outlook for retail sales.

Chan said employment income is continuing to rise, which in turn should also support consumption.

He said Hong Kong should also improve competitiveness through the use of technology, and this would bring in new customers and consumption to strengthen the economy.

He added that the economic climate will remain stable for the rest of the year if exports continue to improve, coupled with a fall in external interest rates and improvement in investment sentiment.

Separately, Chan said there would be risks to making a special loan guarantee scheme a long-term policy to help small and medium-sized enterprises cope with cash flow issues.

"The 100 percent loan guarantee scheme was introduced as an extraordinary measure because of the pandemic. It now has more than HK$13 billion of bad debts. If it is implemented as a long-term measure, we need to be cautious, because it may involve moral hazards," he told reporters.