OPINION – The waters ahead

The yearly Policy Address is formally the most important speech the CE makes regularly. It is the foundation for the budget, which must be approved by the Legislative Assembly. 

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

The new CE has just presented the work plan and objectives of his first year of mandate. It is a bit peculiar that in every first year of the first mandate, we have, in practice, two processes. One carried by the outgoing CE, following the regular institutional calendar, another for the new one, a few months after the start of the mandate. For the latter, the first year is always, in some sense a shorter year. It is somewhat puzzling that there is not an institutional arrangement that avoids this duplication and the kind of political limbo it implies. 

On top of that, this year the Address was made in especially thorny circumstances. The epidemic the world is still grappling with means that the top issue on the agenda is, inevitably, to tackle that issue and its effects. The nature and duration of the storm still has many unknowns; the navigation charts are limited. It is not easy to find the right bearing in these circumstances.  One may feel a new sense of direction, but the weight of the past and the challenges of the unexpected health situation necessarily put a limit on what can be plausibly achieved. 

The Address document reflects a bit of these confusing times. In parts, we find some old promises, supported by the usual verbs. A few of them have been in several previous iterations of the LAG. There is not much to say about them. The real test will be to make them happen. In other parts, one senses a willingness to do things and to increase the rate of achievement of public administration. That purpose can only be celebrated, and success wished. Again, the test will be in their accomplishment. The operating conditions, post-Covid, are the great unknown. 

The top priority deals with the health emergency and its aftershocks. It deserves some more extended reflection – it will make or break the year. It is a task that no one would choose if reality had not chosen it for us. Fighting the epidemic andrelaunching the economy are, of necessity, two sides of the top challenge. As time passes, the trade-offs involved and the weight of their consequences will become more pressing. Even for an affluent society such as Macau, and a financially comfortable administration, the sky is not the limit. 

The total amount of the new budget is not significantly different from the previous one. More resources will be used to support the civil society. Several measures aim at lessening the financial stress of residents. Less will be available for traditional public expenditure. Even Macau’s significant reserves can only do so much for so long. If the economy, meaning gambling and tourism primarily, do not restart in earnest, these will be very challenging times. The government will face increasing and competing demands. 

Measures to sustain demand may be helpful in the short term but will not be sustainable for a very long time. And will not solve the issues on the supply side that are likely to affect an economy that depends on imports for almost everything it consumes – including, namely, food.  Increased competition for scarce goods and aless stable international environment are not implausible if the global situation does not start normalizing shortly.  Bouts of inflation are distinctly possible if the supply networks are not re-established speedily. Even assuming (cheerfully) no further complications on the health side, the economic challenges may be daunting. As it happens, this idiosyncratic economy means most of its determining factors are well beyond our control.