Macau’s economic performance depends on many factors. Most of them, including some, if not the most of the more relevant, are beyond the control of the local public and private agents. The general standing of the Chinese economy is an obvious critical factor.
Most money and people flows sustaining the local economy originate from there. Anything that slows the Chinese economy increases the uncertainty surrounding it or reduces those flows will have an impact on Macau.
The Wuhan flu outbreak is a reminder that health matters in the region are just one of those ‘external’ factors over which our power is mostly limited. On the health side, there is much we can do to prevent its spread, to contain it, and mitigate its effects. When it comes to avoiding or lessening their overall impact on the economy, there is not much we can do.
It is too early to know how long and intense severe the outbreak will be. Protocols for thwarting its spread exist, and the matter is rising to the top of the world agenda. The uncertainty about its development will possibly have an impact on travel plans for many.
The monitoring measures that such situations entail will further discourage travel. The effect will be stronger if negative beliefs build up, namely any concerning the ability of authorities to deal with the situation, or the trustworthiness of their statements on the matter.
But a decreasing number of travelers to Macau alone will not necessarily have a significant impact on Macau gambling revenues. The correlation between the number of visitors and the main source of our income is weak.
Slower growth in China or instability in its financial sector is more relevant factors. So are closer monitoring and control over financial flows by the authorities.
These factors are not new, and some weakening developments have been going on for some time. The outbreak may compound them, especially if the outbreak is prolonged or intensifies. For now, it indeed increases uncertainty, but uncertainty alone may cut both ways.
A likely drop in the number of visitors will first and foremost impact those tourism-related activities where the expenditure of visitors is an important source of revenue. If the outbreak is not contained shortly, they will be the first ones to feel the economic pain. Fortunately, we have enough resources to lessen the effects on people’s livelihood if the episode lasts longer or proves stronger than we would all hope.