GDP to decline up to 29.2 pct in 2022, economic recovery may be ‘long way off’ – Study

Macau’s Gross Domestic Product (GDP) in 2022 is estimated to drop between 26.4 per cent and 29.2 per cent, and an effective economic recovery may be “a long way off”, the revised version of the Macroeconomic Forecast for Macao 2022 released by University of Macau (UM) indicated. 

The research team of the Macroeconometric Structural Model of Macao made a forecast for the local economy at the beginning of this year, but revised the previous forecast as the economic conditions have been impacted by the pandemic outbreaks and the stronger prevention and control measures implemented by the government.

According to the latest forecast report published by the Centre for Macau Studies and Department of Economics of UM, economic growth in 2022 will decrease between 26.4 per cent and 29.2 per cent, exports of services will drop between 31.3 per cent and 33.6 per cent, and the current revenue of the Macau SAR government is expected to be between MOP 29.3 billion (US$3.62 billion) and MOP 33.3 billion.

Meanwhile, growth in private consumption expenditure is estimated to drop between 9.5 per cent and 16.7 per cent, and growth in total gross fixed capital formation will fall between 20.0 per cent and 26.5 per cent.

The inflation rate measured by the GDP deflator will decrease by between 1.0 per cent and 1.5 per cent, and consumer price will go up by 1.3 per cent.

Also, the overall unemployment rate is projected to be between 3.8 per cent and 4.0 per cent, while the unemployment rate for local residents is expected to be 4.9 per cent to 5.1 per cent.

The forecast of these major economic variables is drawn based on two different scenarios pictured by the research team in response to possible changes in the pandemic and government policies.

The first scenario assumes stable growth in the fourth quarter of 2022 and the number of visitor arrivals will return to the level of the fourth quarter of 2021 of 1.95 million, while the team also considers a scenario with worse conditions where Macau will face one more month of lockdown, with only 1.31 million visitor arrivals.

In the forecast report, the research team also noted that as a tourist destination, Macau mainly provides leisure services for tourists, and strict travel restrictions may harm the economic and social development of the SAR.

“If the overly stringent travel restrictions are maintained, it will be difficult for tourists to enjoy the services provided by enterprises and citizens in Macau. Without tourism revenue, Macau’s economy may not be able to develop normally,” the forecast report said.

Following the large-scale emergence of infection cases in local community beginning in mid-June, the GDP fell sharply by 39.3 per cent year-on-year in the second quarter, returning to the level of the second quarter of 2020.

From mid-June to July 2022, 14 rounds of compulsory universal testing and a two-week lockdown were implemented in the SAR, and the economy continued to deteriorate as many daily activities could not be carried out, the study indicated.

At the same time, the research team pointed out that the several rounds of financial support schemes have “only a short-term and limited impact”, and cannot replace the income earned by enterprises and citizens through normal market transactions.

Due to the constraints of internal and external conditions, especially how to establish a set of prevention and control policies suitable for Macau, the society continues to see no clear prospects, and “effective economic recovery may be a long way off”, the research team noted.