The other three crises

Notwithstanding the global financial crisis, in the last 20 years Macau has weathered three other difficult times. Each one generated by external origins

1997 – Asian financial crisis 

The Asian financial crisis started in Thailand in July 1997 with the financial collapse of the Thai baht after the Thai Government was forced to float the baht due to lack of foreign currency to support its currency peg to the U.S. dollar. The country, effectively made bankrupt, contaminated the whole of East Asia.  

“Weakening foreign trade and construction investment was the origin of the contraction recorded in 1996. The uncertainty resulting from the over-supply in the property sector had led to stagnant domestic demand. Since 1998, worsening public security had become the major threat to the local tourism industry, a great contributor to its GDP. Together with the Asian financial crisis in neighbouring countries, the local economy was dragged down by this chain of events,” says Nicholas Cheang of AMCM.  

“From the lessons of the Asian financial crisis in 1997-98,” he said, “it is noted that the systemic fragility would cost a considerable loss of real activities or GDP in the afflicted countries. Macau likewise experienced economic recession from 1996 to 1999, which was induced by various factors including the financial crises of its economic partners.”  

Mr. Cheang added: “In 1998, although most Asian countries witnessed economic contractions during the [depths] of the Asian financial crisis, the rate of contraction in Macau was not as severe as the levels in most Asian countries. If financial stability exists to be stronger in Macau than in other Asian countries, it is obvious that Macau’s financial stability exploited its function of avoiding the economy from further deterioration in an optimal sense during the Asian financial crisis.” 

2002 – Severe Acute Respiratory Syndrome (SARS) 

“Mid-2003 to mid-2004 was a crucial turning point for the MSAR economy,” wrote Eilo Yu and Ming Chan in China’s Macao Transformed, Challenge and Development in the 21st Century. As Macau was climbing out of the recession, the gambling industry had been liberalised and there were promises of gigantic investments.  

“However, around that time, an epidemic of SARS suddenly broke out in November 2002 in Guangdong Province in Mainland China. It quickly spread to Hong Kong, Taiwan, Canada, Singapore, Vietnam, Macau, and other places, causing hundreds of deaths and leading to global panic,” according to Hong Kong-based scholars Victor Zheng and Po-san Wan.  

“This threat of a pandemic devastated the tourism industry. Because of a fear of becoming infected at an airport or by being in a large crowd many potential tourists simply opted to stay home. Macau’s tourist industry, including its casino gambling industry, was badly hit. As the number of visitors plunged and hotel occupancy rates plummeted, Macau’s red-hot economy cooled drastically.”  

Still in 2003, “the central government took prompt action to help its two SARs emerge from the economic doldrums brought about by the SARS crisis” (say the same authors) by announcing the Closer Economic Partnership Arrangement (CEPA) and the Individual Visit Scheme.  

2014-2016 – Decline of GGR 

The effect of the global financial crisis on gross gaming revenue was not significant and in 2010 everything seemed forgotten. Macau’s revenues grew year on year, but the rapid growth of the gaming industry was suspended in 2014 after Chinese President Xi Jinping assumed office in March 2013 and “when Macau experienced its first-ever decline since the liberalisation of casino concessions, falling 2.5 per cent from the year before,” stated Chinese researchers Mingjie Sheng and Chaolin Gu.  

Macau saw a more dramatic drop in gaming revenue of 34.1 per cent in 2015 plus a further 3.3 per cent drop in 2016.  

“This decline was largely due to a sharp fall in revenues from VIP baccarat, which has long been the most important source of revenue for Macau’s casinos,” they add. “Behind this precipitous fall was Mainland China’s anti-corruption campaign, initiated in late 2012. As the campaign gained momentum, it deterred Mainland high rollers from lavish spending, especially on casino gaming.  

“Another factor that may help to explain Macau’s shrinking gaming revenue is the recent casino boom in neighbouring Asian regions. Indonesia, Malaysia, Thailand and Singapore are increasingly competing to secure a share of Asia’s fast growing market, and the emergence of new rivals has made Macau’s gaming industry growth more difficult to sustain.”  

The downward trend continued until July 2016, when the last monthly drop in casino revenue was reported. In August 2016, Macau’s gaming industry posted 1.1 per cent growth (attributed, at least in part, to the launch of Wynn Palace on the COTAI Strip).