The claim mentioned projections of the International Monetary Fund (IMF) suggesting that by 2020 this region’s income per capita might overtake that of Qatar, the current crown holder. The possibility raises undoubtedly interesting questions about the evolution of the local economy and the allocation of wealth brought about by the casino boom. Before we get into that, however, it is essential that we understand what national accounts can and cannot tell us. These types of assertion need to be understood within specific technical and socio-economic contexts.
The fundamental block of national accounting is GDP (Gross Domestic Product). It is a convenient and widely used proxy for national wealth. It is also a flawed one, with known shortcomings. However, for want of a better alternative, we stick with it. Unfortunately, it has gained an almost ‘divine’ status, which we should probably be wary of granting. Suffice it to say two things at this point. First, that similar GDP’s in different points in time, or in different places, do not necessarily translate into the same welfare standards for the population, in general, or the way it affects or is felt by each individual or family. Second, that there is a difference, which in an economy such as Macau’s can be significant, between the region’s GDP and residents’ income levels, even leaving aside matters of wealth distribution.
Further, regardless of other issues apropos the extent and reliability of data collection, which are not irrelevant, comparisons over time and between countries are complicated by the fact that we have to make assumptions about the future behaviour of the economy. Implicitly, at least, growth projections will reflect expectations about the evolution of the population, the productivity of the various production factors, and changes in prices and exchange rates, to name but a few. Not surprisingly, estimates often just extend the latest tendencies, following the most recent path identified based upon the data available.
Does that mean that the IMF ‘forecast’ will not transpire? It depends. The past has shown the outcome hinges on factors that are mostly beyond our control. Suppose the current geopolitical circumstances lead to significant flows of capital out of China: we get past Qatar even faster than supposed. Alternatively, the central government strictly enforces controls on financial flows: it might be 2014-15 all over again. Take your pick.
