Economic prosperity index to rally

The Prosperity Index for January is expected to rally by over one point, with tourists again flocking to the city after three years, the Macau Economic Association (MEA) announced.

Although China began easing Covid-19 restrictions some time before January, the index in December did not perform well, the MEA noted. The December index scored only 2.2 points.

In contrast, the association estimated that the January index will reach 3.4 points, 1.2 points higher than the December figure. Moreover, the group expects the index to further climb in the coming three months, bringing the score from Unsatisfactory levels to Stability levels.

The MEA pointed out that this optimistic forecast is due to several factors.

On one hand, the revival in tourism began almost immediately after the easing of Covid-19 restrictions. On the other hand, the city’s gambling industry has also been given a degree of certainty with the enactment of the updated Gambling Law at the end of last year.

It pointed out that, according to the updated law, each casino licensee must possess capital of MOP5 billion. They have also promised to make investments totaling MOP118.8 billion in the coming decade.

Moreover, the M2 currency supply, which the MEA identifies as a leading indicator for the index, started warming up in Dec. 2022 and achieved a 4.4% rise year-over-year.

What is more auspicious for the city, according to the MEA, is that gross gambling revenue (GGR) has increased following the tourism industry returning to normal settings. Alongside several projects proposed by the government, the MEA considers further improvement in the economy likely.

The International Monetary Fund (IMF) has also become optimistic in its estimate of the global economic trend.

At the same time, the US has also slowed down the increase in interest rates. This is reflected in the Hong Kong Interbank Offered Rate (HIBOR), which has fallen over 50% since the end of last year, showing that the supply of capital is larger than the demand.

However, the group warned of several risks that may cause fluctuations to the index.

For example, the MEA pointed out that geopolitical concerns, such as the Russian-Ukraine War and the pressure from inflation, may linger for some time and cause instability. Other risks may be entailed in the interest rates of the US Treasury Securities.

Meanwhile, although the increase in US interest rates has slowed down, unless its inflation eases, the inclination to increase will remain, posing risks for both Macau and Hong Kong.

The index for Jan. to Apr. is expected to gradually increase from 2.4 to 3.9 points, the MEA forecast.