Over the last fifteen years or so, the talk about the Macau economy has focused mainly on its tremendous growth. Occasional concerns or short-term hiccups punctuated the levels of optimism; but, overall, the sky was the limit.

Opinion | by José I. Duarte

This narrative took a beating in 2014 when the gambling revenues nosedived. Gambling revenue went down by more than one-third within a short period. In 2015, they were almost 40 percent below their 2013 level. Gross domestic product contracted in 2014 alone by more than 20 percent.

The economy went back, so to speak, by some five years. The government, while awash in accumulated surpluses, nonetheless started talking about austerity. But even that flogging was unable to completely break the general mood of confidence and optimism, as most people expected it to be, and it was, transitory.

The crisis was mainly attributed to discretionary changes in policy. They meant increased scrutiny of gambling and gambling-related activities by the mainland authorities, namely a more incisive monitoring of money flows. These changes were understood as a signal, not as a permanent change of policy. In due time growth would resume as soon as the authorities would be content that the message was understood, some would say.

The incident exposed the sensitiveness of the local economy performance to external factors that the local authorities could not control, and over which possibly they could not even have a significant influence. In sum, while those circumstances moderated the growth prospects, they did not mean a dramatic change in the general disposition. Expectations became more guarded, less exuberant, maybe, but self-confidence was back in the display when the economy started to pick up in 2016.

The recent slowdown in the economy, while less pronounced, might elicit a more reserved prognosis. External winds are on a setting that may not be as favorable as before, and they are more structural.

In the first place, Macau is going into a political and economic transition period. It is not just that a new government will take over in December; that government will have as its main portfolio topic the future casino concessions. Little is known about its intentions, and many external and, to some extent, unpredictable factors hang on the decisions that need to be made – and the legal adaptations they will require.

What will be decided will define the steppingstones of the economy for the next couple of decades, assuming the concessions timeframes will be maintained. Until such a framework, or its broad outline, becomes more explicit, everyone will be walking on eggshells, and self-restraint is the mandatory stance. Investments and most everything else will generally be on hold.

Then the external environment is turning less auspicious than it was.

There is increasing uncertainty about the resilience of the Chinese economy. A growth model that operated for over three decades reached its limits, and the smooth transition to a new one is less than assured. Overall growth is slowing down; the stability of the financial sector is in question; demographic trends are worrisome. Add to the background the ongoing trade conflict with the United States that is, regardless of its outcome, a complicated and testing one.

Then, regional political stability, internal and external, is being challenged in several ways. The most immediate apprehension is the situation in Hong Kong – and there are surely ample reasons for concern about its reverberations.

Within this general frame of contingency, the possibility of increased regional competition challenging Macau’s leadership in gambling appears almost like a trivial concern.

Next year, the future regime will start to take form. And as an old and popular song would put it, ‘the times are a-changin’.