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OPINION – Foggy and choppy waters

By the time our readers will be browsing this column, it is likely the GDP data for the first quarter of this year will be out. While waiting for the next iteration of the national accounts, it is worth remembering that figures in 2009 were already in the red. Compared with 2018, GDP for last year was down by about 4.7 percent in real terms. Homologous growth rates for all quarters in 2019 were negative.  

By José I. Duarte | Economist, Macau Business Senior Analyst

Admittedly, both private consumption and government expenditure rose slightly (roughly by 2.5 percent) in 2019, driven by a rising population, average income, and civil service remunerations. But those increases could not make for the losses in investment and exports, namely, gross capital formation and exports of gambling services. The first was down by about 20 percent, the latter by almost 5 percent. Put together, in absolute terms, and at current prices, both losses combined were nearly seven times bigger than the gains in total consumption, private and public.  

Even without the pandemic surprise, the expectations were already on the somewhat darker side. The first quarter brought no good news. We all are aware of the developments relating to the pandemic in the first quarter. The complete closure of the casinos, combined with an almost equally striking reduction in the number of visitors, brought forward figures unseen for many years, if ever since the casino boom started in 2004.  

Our primary source of income, gambling, took a hit of unrecorded proportions. In January, gross revenue was down by 11 percent, compared with the same month in 2019. In the three following months, losses amounted (rounded figures) to 12 percent, 30 percent, and (an amazingly low) 5 percent. For these three months, the cumulative revenue was just one-fifth of what it was in 2018. 

These figures did not bode well for the overall economic activity in the first quarter or the coming months. Other indicators are also less than encouraging. Let us look first to the private sector.  

On the one hand, we see a growing number of lay-offs and dismissals, and the start of negative migration flows. That will mean both less private income, fewer people, and more spending caution for many. Consumption will take a hit. 

Private investment is unlikely to pick up. Construction was down by 25 percent at the end of 2019. With the added uncertainty brought by the impending end of the current gambling concessions and all that is still unknown about the government plans on that matter, it is likely to keep contracting. 

With the current economic uncertainty and the travel restrictions, the number of visitors and gamblers will stay limited, and the external demand for services will keep subdued. Exports of goods have long ceased to be meaningful for the local economy, and the slowdown in the world markets doesn’t help either. 

So, we are left with many struggling private businesses, dealing with a crisis as sudden on its arrival as is uncertain on its future developments; and a government that is trying to address the most immediate effects, but limited ability to plan for the future. Most of the factors that will shape the recovery are beyond its reach to determine. 

The measures taken to support private expenditure in the short term are generally appropriate, but they are no panacea. And the public budget, even one so well provided with reserves like this one, can only go so far. So, things can indeed still get worse before they improve, unless visitors and gambling return in significant numbers, shortly. Getting them back must be the main focus (and hope) of both businesses and the authorities.