The bad inheritance

Social inequalities will not diminish in the future, not least because Macau risks some years of crisis. The new government will be even more aware of any signs of discontent, because Hong Kong is too close. 

MB Jan 2020 Special Report | IMF: from glory to recession


As this special report is being prepared, there is still no clear idea as to how large an economic crisis Macau will face. 

It is impossible at this point to say that it will be more serious than the last one (2014-2016), but it is known that the macroeconomic outlook for the next years in China is not encouraging. 

On the other hand, we have to wait to see what impact Xi Jinping announces in the last days of December. 

Therefore, the only medium-term working document is the latest IMF Outlook, which – as we saw in a previous text of this special report – is not encouraging for Macau. 

There will certainly be a lot of people worried at this point, but none other than the newly sworn in Chief Executive. 

A year ago, when he had enough support to run for the post, and even four months ago, when he was elected, it was not in Ho Iat Seng’s mind that dealing with an economic crisis would be his first priority. 

And, as is well known, in an ecosystem as special as Macau’s, the government assumes a special role in mitigating the social effects of whatever the economic crisis may be. 

In fact, the previous governing team made it clear shortly before leaving office. 

First, was the Secretary for Economy and Finance, Lionel Leong, who said that Macau’s recession period would continue and suggested that the government could intervene if necessary. Some weeks after, the then Chief Executive, Chui Sai On, pledged that the government would monitor the Macau SAR’s current economic situation and prepare any intervention needed to maintain the stability of the economy as a precaution. 

What is different about this crisis compared to the previous one is that the government will be even more attentive to any form of social discontent that may draw inspiration from Hong Kong. 

In the midst of the 2014-16 crisis, the then Macau-based scholar, Newman Lam, predicted that, “the crisis will put pressure on the government and that can be a good thing. When people realize that there is a bomb about to blow, they may do something to stop it from exploding.” 

The bomb did not explode, but, as Newman Lam himself pointed out to Macau Business, “the central government may instruct the new Macau Chief Executive to pay more attention to remedying the income gap (keeping Macau the poster boy of “One Country, Two Systems”) while tightening political control (well, they are still hardliners),” with Hong Kong on the horizon. 

The big challenge, therefore, is to try to prevent the crisis from aggravating social inequalities. 

“As a small, open economy, the negative impacts of global economic risks may be unavoidable,” is the opinion from Professor Florence Lei, University of Saint Joseph. 

Another problem is the income inequality. Professor Henry Lei, University of Macau, points out, “It is probably the fluctuation in economic performance rather than the income growth to bring about such increase in income inequality. Some were forced to leave their high income positions in the gaming sector, given the slump in 2014, and they can no longer return to the original position after the recovery. It may help to explain the issue of income inequality.” 


“As a small open economy, the negative impacts of global economic risks may be unavoidable” – Florence Lei 

Paul Pun, Secretary General, Caritas Macau, understands “this trend can be reversed through government policies; for example, by increased supply of social housing and economical housing so that the financial burden of low-income households can be reduced.” 

Other suggestions from Mr Pun: “At the same time, to stabilise the cost of food and household necessities through introducing more suppliers from neighbouring territories to provide basic food and household necessities given that the logistics capacities between Macau and neighbouring territories has improved significantly. Also, the government can strengthen their support to low-income households through social enterprises, e.g. food banks to provide food and basic necessities to low income households and to lower the threshold of low household income to qualify for assistance.” 

In the short term, the government can only alleviate the problems by maintaining the widespread program of subsidy distribution. 

Because, in structural terms, the problem remains: excessive reliance on gambling as the main source of revenue. 

“Higher export diversification could lead to lower growth volatility,” comments Professor Florence Lei, “Hence, policy makers that promote export diversification can anticipate the smoothing-out of the business cycles and long-run economic development. The Macau government has clearly seen the need and have mentioned its goal to diversify the industries in recent policy addresses,” she states to Macau Business. 


IMF says 

  • Macau SAR’s small and open economy is highly vulnerable to economic, financial and policy developments in the Mainland. With most tourists coming from the Mainland, any policy that undermines their spending power abroad would negatively affect growth; 
  • U.S.-China trade tensions. Worsening of trade tensions between the U.S. and the Mainland could significantly impact Macau SAR, including via a fall in tourism inflows from the Mainland and reduced investment by the three U.S. casino operators; 
  • Given the indirect exchange rate peg to the U.S. dollar, the pataca would appreciate relative to the renminbi, possibly reducing Macau SAR’s competitiveness and weakening gaming spending per visitor, though gaming revenue has been resilient to the exchange rate; 
  • Emerging gaming centers in Asia could start diverting Mainland tourists from Macau SAR; 
  • Faster diversification progress and further land reclamation could boost sustainable growth by widening non-gaming tourism options and helping housing affordability. 

(IMF’ Staff Concluding Statement of the 2019 Article IV Mission)