Macau’s real GDP will contract by 5.9 per cent this year because of a fall in gambling revenue but will return to growth in 2017.
This is the forecast of a report on Macau for the second quarter of this year by the Economist Intelligence Unit (EIU), published in London on June 20.
It said that gambling revenue fell 11.9 per cent year-on-year in the first five months of 2016. “We continue to believe that Macau’s economy will contract further this year, with a partial recovery only in 2017. The territory will struggle to identify high-value sustainable activities that could provide the support to GDP growth previously provided by the gambling industry,” it said.
The development of MICE (meetings, incentives, conferences and exhibitions) – a possible substitute for this lost revenue – had been a disappointment, with official figures showing 191 such events in the first quarter of 2016, down by 20 per cent year-on-year, with figures for participants and attendees down 50.4 per cent to 124,960.
In the first quarter, only four exhibitions were held, down from 10 in the same year-earlier period. “Such events will not replace gambling-oriented tourism expenditure in 2016-2017 … the industry remains small, attracting a trickle of visitors and revenue,” the EIU report said. “Gambling will remain the dominant sector for the foreseeable future.”
On the positive side, it forecast real GDP growth of 5.3 per cent in 2017, against a minus 5.9 per cent this year and minus 20.3 per cent and minus 0.9 per cent in 2015 and 2014 respectively.
It said the 2017 increase will be due to an expansion in spending by mass-market consumers that will begin in the second half of this year. “The recovery in gambling exports will help to drive a return to positive rates of economic growth in 2017,” it said. New developments in the Cotai Strip will open from late 2016, boosting casino and hotel capacity. In addition, despite the fall in gambling revenue, the services account will continue to post large fiscal and current-account surpluses in 2016-2017.
The government is facing new challenges on the social front.
It said that the Chief Executive will face higher levels of public discontent in his second term than he did in his first term. “However, larger-scale protests will arise only as the next chief executive election nears in 2019 … the outlook for political stability in 2016-2017 remains generally positive.”
It said that the younger generation were receptive to calls by opposition and civil society groups for a more transparent and accountable political system. “Opponents of the government will find more fertile ground for cultivating public support in their demand for quality-of-life issues.” These include the widening disparity in incomes, soaring cost of housing and large-scale immigration.
“The Chief Executive and Executive Council (the cabinet) will struggle to tackle the broader roots of discontent. This is partly because Chui has little room in which to be creative politically,” it said.
One of the major long-term issues is the extension of licences granted to the casinos; the first is due to expire in 2020. There is uncertainty over the mainland’s stance on this issue, the report said. “Media reports have suggested that the authorities would not increase the number of available licences beyond the current six at the end of the licence period. There is also speculation that licences may be renewed for less than the 20-year period currently in force. Both rumours look likely to be true.”