At the time of this writing, the signals about the development of the coronavirus epidemics are mixed. Considerable uncertainty still prevails. There is some hope it is peaking in China, its main battleground; however, there are some worrying outbursts in other regions that suggest we may be entering a new phase.
By José I. Duarte | Economist, Macau Business Senior Analyst
How wide and how long the epidemic will spread are not minor questions. They will affect both the strength of its economic effects and the speed of the subsequent recovery. It would be foolish at this time to sound confident about either the end of the crisis (in Macau or elsewhere) or the breadth or depth of the tools that may be required to help mitigate its impacts.
The main questions may be outlined, nonetheless, especially concerning our economic predicament. So far, Macau has been spared severe health effects. A combination of discipline and luck seems to have limited the number of cases and casualties. Many will fortify their belief that Macau is indeed protected by a powerful combination of eastern and western deities, if not by the gods of fortune themselves. The nature of the local economy may have helped, as circumstances discourage or prevent many from traveling. That same nature, however, makes us especially vulnerable to what happens in the neighboring regions.
The immediate effects are visible and dramatic. The economy came to a virtual standstill. Casinos, hotels, shops, and restaurants were closed for at least a couple of weeks, or ran well below the normal level. The pain inflicted on many households and businesses will not be mild or short-lived. With two-thirds of visitors originating from China, there is no way any meaningful recovery can start before things normalize on the mainland.
The full extent of the harm the epidemic will have done to the Chinese economy will not be visible straight away, even if the crisis ended tomorrow. The disruption of people’s lives and income, and the damage done to food output or industrial supply chains, cannot be adequately assessed yet. How willing and able the Chinese visitors will be to travel to and spend in Macau (and, consequently, reestablish normal flows of people, goods, and money to Macau) may be, for several months after the end of the epidemic, an open question.
And yet, that dependency underpins another aspect of our singular state of affairs. The same links that make Macau so vulnerable allowed the region to accumulate over time a level of wealth, public and private, which may, if wisely used, help mitigate the impact. In particular, the government has accumulated an enviable level of financial reserves that exist to provide a buffer for the rainy days. Those can now be put to good use, justifying their accumulation.
In that disposition, the government announced a serious of measures to attenuate the short-term pain. It is good that such measures are contemplated and that the announcement was quickly made. That helps relieve some of the inevitable anxiety many families and businesses will be feeling right now.
Essential details about the precise scope of those measures and the corresponding procedures are still missing. It is therefore premature to reach firm conclusions about their substantive adequacy in the abstract or presumed impact, in practice. Those will need to be clarified in the coming weeks. But they are going broadly in the right direction, attempting to reassure the population and lessen the immediate income effects of the crisis. Even if some prove to have more of a psychological impact than a real one, they are helpful and fitting. Psychology counts in these times.