Economy | IMF slashes its Macau growth expectations

The International Monetary Fund (IMF) has lowered its growth forecast for Macau less than two months after it commended the city’s authorities for their prudent management of the economy.

The latest World Economic Outlook report was released earlier this week. It projects that growth in the Macau SAR economy will slow to 4.3% this year, down from the forecast of 5.3% in the February assessment.

Annual growth in the city will slow a further 10 basis points to 4.2% in 2020 and 4.1% in 2024.

In the February assessment, the IMF warned that Macau faces several medium-term risks, including the diminishing spending power of mainland tourists and the possibility that gaming revenue tax, which provides the bulk of government income, will be unable to keep up with mounting social welfare costs incurred by an ageing population.

The assessment found that risks to the Macau economy are “tilted to the downside” and “mainly emanating from mainland China.”

Last year, the economy grew 4.7% following a 5.6% expansion in 2018 and 9.7% in 2017, fueled by the recovery of the city’s gaming sector.

The latest forecasts indicate that growth will continue to decelerate in the coming years.

The IMF had reported earlier that growth in the Macau economy should settle at about 5% per year in the medium term. However, following the latest forecasts, which are almost 1 percentage point lower than the medium term estimate by 2024, it is not clear whether the figure will be revised.

In other areas of the economy, the rolling inflation rate, measured by the average of the last 12 months over the previous preceding 12 months, is forecast to fluctuate between 2.5% this year and 2.7% in 2020, with the unemployment rate remaining at 1.8% in both years. DB