Macau’s economic growth is expected to slow by more than three percentage points this year from 9.1% in 2017 to 5.8%, before dropping back to 3.9% in 2019, according to forecasts ofrom the Economist Intelligence Unit (EIU) in its latest report on the territory.
Predicting an average growth rate of 4.8% for the two years under review, the EIU said economic growth, despite being in decline, will be helped by growth in gambling and continued public spending on social housing, which will support investment .
The report expects that government efforts towards economic diversification will achieve little in 2018/2019, although gaming operators are expected to invest heavily in tourism not directly related to gambling, which will help expand leisure and entertainment services.
The EIU also predicted that the Macau government will continue to achieve positive budget execution balances of 8.0% of gross domestic product (GDP) this year and of 7.1% in 2019, after accounting for one tenth of the budgeted expenditure last year and that the unemployment rate will remain historically low, with an almost natural rate of 1.9% over the two years under review.
The inflation rate is expected to increase driven by the slight appreciation of the Chinese currency against the pataca, returning to slightly above the value recorded in 2016 (2.4%) and more than double the amount recorded in 2017 (1.2%), with positive changes of 2.7% and 2.8%, respectively, in 2018 and 2019.
The EIU report mentions there should be no chance that the direct 35% tax on gross gaming operators will be reduced over the next two years and recalls that that burden is much higher than in other jurisdictions.
This tax burden coupled with the moderate growth in public spending forecast for 2018/2019 means the government will raise significant budget surpluses, added to the reserves that have been steadily growing since the gaming sector was liberalised in 2001.