Economist: Coronavirus scare will have ‘great impact’ on economy for many months

With the enforcement of measures by both the local and central government aiming to contain the outbreak of the coronavirus (2019-nCoV), Macau has seen a drastic fall in the number of visitors, which threatens to have a deep and lasting impact on the local economy.

Visitor arrivals over the first six days of the Lunar New Year period slumped 76.5% year-on-year to just 243,200, according to official data, with those from mainland China, declining 81.7% over the same period.

For the economist Albano Martins, the effects for the local economy that will arise from the virus outbreak are still difficult to ascertain. That will depend on the duration of the virus’s influence and that too is unknown.

Still, Martins points out one certainty: “The impact will be brutal as we are already in recession since the last quarter of last year and we will continue in recession. 2020 was already forecasted as a recession year and [now] will definitely be so. Now it will be aggravated, probably reaching a double-digit decline and it might not be a small [two-digit] number.”

For the economist, the high impact to the local economy is also related to a structural problem concerning the diversification in the type of gambler in Macau.

“We have been trying to diversify the economy [in a way] with the mass market [gaming] and we have achieved some results with this type of gaming already surpassing the VIP market,” Martins said to the Times, adding, “But this is one of the small issues that the mass market [gaming sector] can bring to Macau. When there are no masses there is no mass market and I think people never really thought about this that way. In a small territory, it is far more productive to have VIP gaming than to have mass gaming, even if for the casinos the mass market would be more beneficial since it has fewer costs.”

“We have several issues regarding the mass market such as the lack of manpower and the table growth rate of 3%; a figure that nobody knows where it comes from or who suggested it.”

The economist alerts that at this moment the government has no real options to mitigate the negative impact on the economy from the virus outbreak as the government cannot control this external factor arising out of the mainland.
“Even if the government manages to internally contain the virus spread, the borders will continue to be under retention and this means that there will be no influx of what is the engine of the local economy – that is, the Chinese economy,” he remarked.

If the results in the short term are already clear, the long terms effects will be dependent on how long the current situation and restrictions persist.

“The situation at the moment is that nobody knows how long the outbreak will last, but we are led to believe that we are still at the beginning of it and as more months will pass, less trade will happen, as is already happening. There will be no visitors or there will be a very small number and most of the local companies will be also in a kind of dormant state, waiting for better days to come.

“This will have a great impact on the Macau economy,” added Martins.

The economist also said that besides the gaming and tourism sector, most of the rest of the local economy, based on small and medium sized enterprises is somehow connected to the main sectors, as “most of these companies provide products and services to the big casino companies.”

For Martins, the only way that the local government can interact with the economy is to promote confidence and trust among the major players, that is, the gaming concessionaires.

“It would be good if the government takes this period […] to start drawing up the new gaming license rules because these rules would give a certain degree of security to the operators,” Martins said.

“The government should be focused on shedding more light on the new gaming licenses because that would contribute to [reassuring] the economy.”

The economist adds that this time could be used to “anticipate the new trends for 2021 and 2022,” which although would have no impact on this year, would prepare local business operators to make use of the eventual economic recovery.

“At least we can start to do the homework for the upcoming years,” said Martins.