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Relying on the Mainland

The local economy has entered into a ‘period of adjustment’ according to the annual report by the Monetary Authority of Macao (AMCM).

The local economy has entered into a ‘period of adjustment’ according to the annual report by the Monetary Authority of Macao (AMCM). The report showed a positive viewpoint of the SAR’s financial situation – noting an expansion in the scale of the banking sector through its gross assets, loans and advances and financial investments for the year 2015.

Profit
Operating profits for the banking sector for the year grew by 16. 3 per cent year-on-year to MOP12.8 billion (US$12.8 billion) with total cash flow, excluding allowances for depreciation and provision, increasing 12.7 per cent to MOP14.9 billion. This indicates, notes the report, that the sector has ‘been able to maintain good profitability and sound financial position during the course of economic adjustment,’ an adjustment made in an environment of ‘ample opportunities for the MSAR banking sector’ but nested in a global economic and financial environment the AMCM defines as ‘complicated and volatile’.
The authority urges banks to ‘stay alert and enhance their risk management and internal control systems to address relevant potential risks and challenges’.

Opportunity market
‘Influenced by external factors, the local economy in the process of adjustment continues to slow down, leading to the emergence of a new economic normal with specific challenges being lower visitor arrivals, slackened consumer sentiment, drop in real estate prices and sustained fall in gaming receipts,’ states the AMCM Chairman Anselmo Teng Lin Seng in his message included in the report.
This ‘new economic normal’ however is contrasted by a series of positive conditions for the SAR’s development – says the monetary authority – such as the increasing implementation of policies for economic diversification and long-term development plans with the central government – including the ‘One Belt, One Road’ policy and CEPA (Closer Economic Partnership Agreement), the development of Hengqin, the ‘Framework Agreement on Cooperation between Guangdong and Macau’ (as well as a free trade zone with the same region) and the general opening of the Pearl River Delta region to trade opportunities.
The authority describes these opportunities as ‘the unique competitive advantages’ for the local banking sector, urging those in it to ‘grasp these opportunities’ as well as ‘making contribution to the stability and development of the MSAR financial system’.

The future
Although the ‘zero-debt financial position of the MSAR Government continued to remain intact,’ for the year 2015, notes the report, while public expenditure continued to increase, growing 22.4 per cent to MOP80.5 billion last year. The monetary authority took note that the ‘fiscal surplus dwindled further to a preliminary estimate of MOP29.3 billion in 2015 from MOP90.3 billion in 2014’ – on the back of ‘the culmination of a notable drop in public revenue and hike in public expenditure’.
The authority noted its reliance on external markets, stating it ‘continued to promote international and regional cooperation’ to ‘expand the development frontier for the local financial industry’ but the Chairman notes that ‘macroeconomic policies in advanced economies are still expected to be full of uncertainties’ and could turn out ‘contrary to the original expectations’. However a focus on the Chinese market is necessary due to it being ‘at an important stage of structural adjustment’, largely done through establishing ‘a close working relationship with overseas central banks and supervisory authorities for mutual assistance and exchange of supervisory information’ under memorandums of understanding.
The Chairman notes his belief that the local financial industry will ‘as always, align with the administration of the MSAR, and strengthen awareness of potential crises’.

OPINION

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