International Monetary Fund worsens local economy projections for 2020-2021

The International Monetary Fund has worsened its outlook estimates for the Macau economy in 2020 and is now predicting a 53.5 per cent drop in Gross Domestic Product (GDP) for this year.

Back in April, the IMF was predicting a 29.6 per cent contraction in the local economy, but the pandemic progression led to a more pessimistic outlook, including for 2021, with the international organisation now expecting a 23.9 per cent contraction instead of a 32 per cent recovery.

The IMF is also predicting that the annual per cent change for the local inflation rate and average consumer prices would reach 1.7 per cent, with 2021 to see a 1.8 per cent inflation rate.

At the same time, the international body is predicting that 2020 will end with a 2.3 per cent unemployment rate – which currently stands at 2.8 per cent, but 4 per cent for local residents – with 2021 to finish with a better 2 per cent unemployment rate.

The local economy has been greatly impacted by a dramatic decrease in visitor numbers as the Covid-19 pandemic greatly condition travel flows to the SAR, with an 87 per cent drop in visitation to about 3.2 million between January and August.

Local gross gaming revenues have also dropped by 82.5 per cent year-on-year to some MOP38.6 billion (US$4.8 billion) between January and September, leading the local government to increase financial support initiatives and to plan a 10 per cent budget reduction for next year as gaming tax revenues plunged.

The Macau SAR government has collected a total of MOP22.8 billion in gaming taxes between January and August, less 70.1 per cent than in the same period last year.

During the National Day reception, Chief Executive Ho Iat Seng indicated that public services have been under “a lot of pressure” to try to reduce spending, but the cuts applied have been revealed insufficient to balance the accounts, given the “very low” revenue collection.

Therefore another proposed amendment – the third this year – will likely be made to 2020 government budget so as to add an extra MOP20 billion (US$2.5 billion) from local financial reserves to balance the budget in the face of reducing public income from gaming taxes.

Still, as at the end of August, the local Financial Reserve still held MOP609.3 billion in assets, with the local government also planning to invest MOP10 billion in local infrastructure projects next year to boost the local economy.

Meanwhile, Hong Kong is expected to see a 7.5 per cent contraction in 2020 and a 3.7 per cent recovery in 2021, with Mainland China to be the only large developed country to end 2020 with a positive economic recovery, some 1.9 per cent, and with an 8.2 per cent bump in 2021