Local economist Albano Martins has told MNA that he believes that Macau’s economy has “almost certainly” already entered into a recession, considering the negative gross domestic product performance in the first quarter of this year; the decline in gross gaming revenues so far; and that most large scale integrated resort projects have already been completed.
Macau’s Gross Domestic Product (GDP) for the first quarter this year contracted by 3.2 per cent year-on-year in real terms, ending an uptrend that had lasted for ten consecutive quarters.
According to Mr. Martins, although data on the second quarter GDP has not yet been released, there are many indicators that there will be another negative performance in that period, and therefore the city has “almost definitely” already entered a technical recession.
The economist noted that Gross Fixed Capital Formation (GFCF) in Macau reached some MOP18 billion (US$2.2 billion), MOP17 billion, MOP15 billion and MOP19 billion in the four quarters of 2018, respectively, while the first quarter of this year had only recorded some MOP11 billion.
“It’s very likely that GFCF in the second, third and fourth quarter of this year will be below MOP10 billion and this will drag the GDP down,” he added.
“Then it will be hard for the third and fourth quarters to be different since the gross gaming revenues have been reducing in annual terms and generation of GFCF has drastically reduced due to the conclusion of most integrated resort projects”
Meanwhile, the economist noted that although accumulated gross gaming revenues recorded a slight 0.5 per cent year-on-year drop in the first three months of this year to about MOP76.1 billion, this drop remained until July, which saw an almost 1 per cent year-on-year drop in accumulated revenues to some MOP173.9 million.
“It’s not a huge decrease but considering the huge importance of the sector to our economy it just needs a small decrease to bring the GDP down […] It all seems to indicate that we are already in a technical recession, we just don’t have the published government data yet,” Mr. Martins said.
Around May, American credit rating agency Moody’s indicated that it expected the Macau economy to expand by around 4.5 per cent in 2019 and 2020 ‘on the back of increasing gaming and tourism receipts, supported by the recent opening of the Hong Kong-Zhuhai-Macau Bridge (HZMB)’, a prediction also backed by the International Monetary Fund.
However, in June, the Economist Intelligence Unit (EIU) estimated predictions had to be adjusted to a 0.3 per cent GDP contraction in 2019 for the city due to lack of investment in public works and no new casinos or resorts being planned for this year.
“It is very unlikely that Macau will see positive growth this year,” the economist told MNA.
Concerning what measures the Macau government could take to avoid the recession the economist noted that the execution rate for the government’s Investment and Development Expenditure Plan (PIDDA) is low – only 19 per cent of the MOP8.4 billion budget as of July – while the government represented a small part when compared to the private sector.
“Casinos are God and Devil in Macau. If everything goes well and there’s an investment they push the economy. In this phase where they are waiting for the new gaming licenses, I don’t think you will see much more investment. It would be a considerable risk,” he noted.
The current gaming licenses for the three concessionaires and sub-concessionaires are set to expire in 2022.
The economist also considered that the recent restrictions imposed by Chinese central authorities on junket operations also made it hard to expect an improvement in gaming results in the city, and therefore on the local economy.
