Macau’s economy in the next three months will remain at a “poor” level due to the impact of the Fed’s interest rate hike, but the policies of the Chinese mainland should safeguard Macau’s long-term economic development, Macau Economic Association indicated in the economic prosperity index report.
Impacted by the pandemic outbreak in June, economic activities in the SAR have been significantly reduced, with several economic indicators including the tourist volume, hotel occupancy rate, and gross gaming revenue remaining at a low level, the association said in the report.
The only economic indicator which stood positive previously – import volume of goods – also fell significantly in July to MOP4.39 billion (US$543 million), down 71.5 per cent from MOP15.39 billion in the same period last year and 58.2 per cent from MOP10.5 billion in June, according to the association.
Therefore, the economic prosperity index in July fell to 1.2 points, “reflecting the huge impact of the previous pandemic outbreak on the local economy”.
Meanwhile, the report said that global inflation still remains at a high level, although crude oil prices and food prices have dropped recently, and it is believed that the Fed will continue to raise interest rates by 0.75 per cent on September 22 as the US consumer price index in August rose by 8.3 per cent year-on-year.
The Federal Reserve has already implemented four interest rate hikes in 2022, including two consecutive rate hikes of 0.75 per cent in June and July, and the federal funds rate is currently 2.25 per cent to 2.50 per cent.
The aggregate cash balance in Hong Kong has continued to contract, and the one-month Hong Kong dollar interbank offered rate (HIBOR) has also risen to 2 per cent.
The association emphasized that if the Fed raises interest rates as expected next week, funding costs for the Hong Kong and Macau banking sectors will rise further, increasing the likelihood of interest rate increases.
The possible interest rate hike will increase the cost of financing and bring more uncertainties to the local economic recovery, the report noted, and several factors will also impact the local economy in the coming months, including local enterprise operation difficulties, high unemployment rate and underemployment rate, decreased residents’ income, and rising non-performing loan ratio of residents and non-residents.
Therefore, Macau’s economic prosperity index is estimated to remain at a “poor” level of around 1.8 to 1.9 points in the next three months, the report indicated.
However, the association stressed that the policies to be launched by the Chinese mainland will bring new hope to Macau’s economic development, despite the “unprecedented difficulties and challenges that Macau’s economy and society are facing”.
Xia Baolong, vice chairman of the National Committee of the Chinese People’s Political Consultative Conference and director of the Hong Kong and Macao Affairs Office of the State Council, made a special trip to Zhuhai to meet with Chief Executive Ho Iat Seng, and confirmed that the central government will study and launch preferential policies and measures to support the development of the SAR.
“The Chinese mainland has always been a strong backing for Macau to maintain long-term prosperity and stability. The current economic downturn is only short-term, and there is no need to be too pessimistic,” the economic report said.
