By the middle of last year, I was writing that it was clear that the IMF’s forecasts of 2 per cent inflation in 2017 would be very wrong.
I said that I was forecasting 1.2 (3) per cent and that if I was wrong it would only be by a hundredth.
Numbers recently released by DSEC reveal that Macao’s inflation in 2017 posted exactly 1.23 percentage points.
And now to 2018, what will our inflation be?
Please let me say that the last Household Budget Survey (HBS) was from 2012/2013 and in line with international practices – and I have been criticizing this many times – the new CPI will only appear in October 2019, five years after the previous release.
If this is so internationally accepted, then why my disagreement?
The point is that in the year of the survey we may be in a very high or very low phase of the economic cycle; for example in recession or exponential growth (with periods of deflation or strong inflation) and therefore the basket of purchases that results from the survey may not translate the new reality five years hence!
And the Macau economy may do that very fast.
Please see, in 2014, when the new index was done, Macao was in recession, and its growth was relatively small compared to what had occurred in the past (in 2010, 25.3 per cent; in 2011, 21.7 per cent; in 2012, 9.2 per cent; in 2013, 11.2 per cent; in 2014, -1.2 per cent; in 2015, -21.6 per cent; in 2016, -0.9 percentage points)!
In recession or smaller growth periods it is natural for housing rents to occupy less weight in the basket . . .
I feel that rents skyrocketed in 2017, with a gap that I estimate to be around one year, reflecting real estate prices that grew in 2016 (in Macau they grew 32.17 per cent globally), but according to the statistical data housing rents (which weight in the basket 19.76 per cent) had fallen 1.4 percentage points by 2017.
I really do not believe it!
Turning now to inflation for 2018, with the same basket, even with a likely fall in GDP growth in 2018 I would venture to say that inflation could be between 1.98 per cent and 2.58 per cent
This indicates that our inflation will cease to be so officially dim in 2018.
By January of this year, I think it should be around 1.24 percentage points.
We will see next month!
*Economist and regulator contributor to MNA