Economy expected to slow in June before rebounding in summer

[Photo: Renato Marques]

Macau’s economy is set to soften in June before staging a gradual rebound over the summer months, according to the latest forecast by the Macau Economic Association (MEA), which cites external financial pressures and seasonal factors as key drivers of the short-term slowdown.

The association has released its latest forecast on the Macau Economic Sentiment Index covering June, July, and August, which aligns with previous predictions, namely those from gaming industry analysts, who pointed to June as a month of slowdown.

In the report, the association correlates these indicators, noting that external factors are contributing to the temporary downturn.

“The intertwining of global geopolitical risks and energy price volatility has made the global inflation outlook increasingly uncertain. The latest U.S. inflation data exceeded market expectations, reaching its highest level since April 2023, further reducing the likelihood that the Federal Reserve will cut interest rates in the near term,” the association’s statement said.

“Against this backdrop, the global financial environment is likely to remain tight for some time, exerting sustained pressure on international capital flows and investor sentiment toward risk assets,” MEA added.

The association also noted that in June, Macau’s tourism and leisure sector may face a temporary slowdown due to factors such as reduced travel willingness among family groups during the mainland’s college entrance exams and the diversion of travelers’ spending and gambling budgets toward major international sporting events like the FIFA World Cup.

“However, as the college entrance exams conclude and the summer travel peak season begins, these negative factors are expected to subside gradually, and tourism and consumer demand are projected to rebound,” the group said.

The association expects June to be a one-off month in terms of the economic slowdown, with recovery expected to begin immediately in July and August.

“Although external conditions and seasonal factors have posed temporary challenges to Macau’s economic conditions, tourism market demand is expected to remain robust, supported by the long-term stability and positive fundamentals of the mainland economy,” MEA said.

“Coupled with the approaching traditional summer travel and consumption peak season, comprehensive analysis and projections indicate that the Macau Economic Sentiment Index for June through August will range from 6.3 to 6.8 points, remaining within the ‘stable’ range overall, reflecting the continued moderate growth trend of Macau’s economic conditions,” it added.

Earlier, the same group had noted that May had shown good performance, driven by daily average visitor arrivals consistently exceeding 110,000, and that indicators such as tourism and leisure, hotel accommodation, and goods imports remained at high levels.

The association noted that “During May, Macau’s tourism and leisure sector demonstrated strong external growth momentum, with gross gaming revenue reaching MOP22.6 billion and average daily gross revenue hitting MOP729 million, reflecting stable macroeconomic performance.”

Still, MEA pointed out that during May, stock prices of Macau’s six major integrated resort and leisure enterprises weakened, and local domestic demand and consumer confidence remained sluggish.

They highlighted that both visitors and residents have been adopting increasingly cautious and rational spending habits amid current uncertainties, a trend also reflected in the loan-to-deposit ratio for residents at banks, which further declined to 43.7%.

This factor indicates that while market liquidity is ample, credit demand is insufficient, reflecting generally conservative investment sentiment among banks and enterprises.

Following the same trend, the residential property price index continued to hover at low levels below 190 points, which led the group to state that the “positive spillover effects from the tourism and leisure sector have yet to materialize, failing to boost consumer confidence or drive a simultaneous recovery in the real estate market.”

This broader economic forecast follows those of analysts, mainly from investment banks, who noted earlier this month that gross gaming revenue could drop by up to 10% in June (month-on-month) while remaining in positive territory compared with the same period last year.