Animal Farm | The economic recovery imperative

Albano Martins

The Government has decided to launch towards the end of this economic year “8 measures to support SMEs,” to which I add, and workers.
For the time being, nothing has been quantified, although it is assumed to be a prudent and adequate use of public resources.
It will not lead to major impact on the 2021 budget due to the late announcement of this measure. Such support will most likely come only in 2022. The biggest impact on the economy this year will be due to the savage drop in gaming revenues and dependent activities, of which there are many. The Intermediate Consumption by the gaming sector (the value consumed in order to produce) was 42.3 billion over the whole of 2019, which are the last values known.
Good budget principles are that revenues should be always underestimated, and expenditures overestimated to avoid further overruns.
Revenues were overestimated because the Government forecast 130 million as revenue from gaming, and expenditures were underestimated because the Government did not take into consideration an emergency plan to deal with the implications of having an economy closed to the world.
As is well known, gaming revenue to September was only 67.79 billion, but the Government had estimated 130 billion for the whole year, which suggests an average of 10.833 billion per month. This figure was never achieved in any month in 2021 although it came close in May. Now it will be necessary from October to December for gaming to produce something like 20.734 billion per month, which does not seem possible
When you make economic policy, you must make realistic predictions of the variables that influence an economy.
Now, more than halfway through, the Government launches a document, which is still to be discussed in the Legislative Assembly, where another budget amendment will be presented, and then the 2022 budget will be presented.
We underestimated the implications for economic activity in Macau of closing the economy to the outside world, driven by the zero-case policy.
If these policies are maintained, even intermittently, until the end of the year, Macau’s GDP will be deeply affected, after a year in which it fell by 56.3 percent. Gaming revenue until September alone was something like 30.8 percent of that achieved in the same period of 2019.
The fall in gaming revenue compared to the Administration’s expectations, adversely impacted revenues to September by 11.6 billion patacas and most likely by 17.2 billion to the end of the year. In other words, there will be a fiscal loss of this nature solely attributed to gambling, to which the fiscal loss resulting from the fall in economic activity and the policy to support the economy must be added, even if the latter is not very ambitious.
This will be not good optics.
In this economic support document, there are four measures that implicate a loss of revenue, and another four that will not have budget effects. Two may lead to deferred collection and two others, suggested by AMCM, are just a request to banks and private operators to help those required to pay loans or those who use the “simple pay” service. Even if the latter is not labeled by AMCM as bad debt, they will weaken liquidity and assets of the financial system.
Finally, regarding measure eight (the MOP10,000 handout for lowest earners) it would have been more appropriate to align this measure with the median salary for 2020, which, as is known, was 15,000 patacas.
Those who had been earning lower wages would thus have a higher percentage increase.
Doing as the Government proposes probably supports less than 180 thousand workers of a universe of 388.8 thousand.