By Chun Kwok LEI, Henry
Assistant Professor in Business Economics, Faculty of Business Administration, University of Macau
The recent outbreak since June 19 has had destructive impacts on the already slumpy Macau economy. It implied an immediate stop of all the tourism related businesses, the loss of tourist expenditure and shrinkage in the already depressed gaming revenue. Simultaneously, the SAR Government announced the compulsory closure of service sectors with high risk, the suspension of eat-in services for all restaurants, and the shutdown of leisure facilities, which has panicked domestic demand. In line with the increasing number of confirmed cases, the SAR government decided to tighten further the anti-pandemic measures to adopt “Relatively Static” management in the city from July 11 to shut down all the non-essential businesses and casinos. Moreover, apart from carrying out livelihood related activities, all the residents were required to stay at home in the “Relatively Static” period.
In practice, such a quasi “lockdown” is expected to further deteriorate business confidence, weakening consumption incentives, affecting not only the gaming and tourism related sectors, but also the domestic demand of the Macau economy. Gross Gaming Revenue (GGR), visitor spending and household consumption are some of the areas most heavily affected. For GGR, it was MOP2.477 billion in June 2022, representing a drop of MOP4.058 billion or 62.1% relative to June 2021, or a drop of MOP0.864 billion or 25.86% relative to May 2022. Visitor spending is another category to be overwhelmed. In the first quarter of 2022, total visitor consumption was MOP6.595 billion, with the monthly average of MOP2.198 billion which may vanish during the outbreak. In light of the impacts on household consumption, with reference to the 12 sections of goods and services listed in the Household Budget Survey 2017/2018 of the Statistics and Census Service (DSEC), areas such as Clothing and footwear, Household items, Transportation, Recreation & culture and Miscellaneous goods &services are believed to be affected more seriously with a combined share of 25.8% of the MOP6.788 billion monthly total household consumption in 2017/2018. Given that, household consumption could decline by 25% or more in the quasi “lockdown” period, while the outbreak may bring about a loss of 15% to 20%or MOP1.02 billion to MOP1.4 billion in household consumption per month.
As a whole, in view of the losses in GGR, visitor spending and household consumption from June to July, the sum has already amounted to MOP7.6 billion (with approximately MOP3.8 billion loss in GGR, MOP2.5 billion loss in visitor spending and MOP1.3 billion loss in household consumption). The actual losses could be even greater, taking into account the depressed business confidence, investment incentives, and linkage effects. Therefore, economic stimulus from the government to prevent the Macau economy from entering into a deep recession becomes essential and critical.
Fortunately, the SAR Government has adopted a proactive approach to announce a MOP10 billion economic recovery plan at the beginning of the outbreak, with the intention of offering financial relief measures to alleviate the adverse impacts. In response to the prolonged “relatively static” arrangement, on July 16, the SAR government pledged an extra MOP10 billion for the public and other pandemic-related expenses. Since this sum of MOP20 billion is not reserved for one-to-one compensation for the losses incurred in the outbreak, a considerable portion of the financial relief will be used by businesses to settle their due bills, or as financial resources to cover the daily expenses of the individual beneficiaries.
Therefore, the recovery plan is not likely to reverse the recession faced by the territory from the perspectives of its allocation and capacity. Nevertheless, the measures offer the needed financial support and confidence to both the Small and Medium-sized Enterprises (SMEs) and individuals who are severely affected by the pandemic, strengthening their tolerance of economic uncertainties under the pandemic. By far, introducing economic stimulus and financial relief measures is the only option of the SAR government which would be used repeatedly until pandemic effectively ends, even though the measures’ counter-cyclical impact is not as strong as expected.
As a result, the recovery plan is unlikely to reverse the territory’s recession given its way of allocation and capacity. Nevertheless, the measures offer the needed financial support and confidence to both the Small and Medium-sized Enterprises (SMEs) and individuals who are severely affected by the pandemic, strengthening their tolerance of economic uncertainties under the pandemic. By far, introducing economic stimulus and financial relief measures is the only option of the SAR government that would be used repeatedly until the pandemic effectively ends, even though the measures’ counter-cyclical impact is not as strong as expected.