Economy rebound surpasses expectations as GDP rises 26% in Q1

Macau’s economy has shown remarkable signs of recovery in the first quarter of 2024 as the gross domestic product (GDP) surged 25.7% year-on-year in real terms, surpassing analysts’ expectations.

Previously, the Macau Economic Association (MEA) projected that the GDP for the first quarter would reach approximately MOP92 billion, which would have reflected a significant year-on-year increase of approximately 19%.

According to the latest data from the Statistics and Census Service (DSEC), GDP growth was primarily driven by a rebound in service exports, particularly in the gaming and tourism sectors, as well as steady private consumption and investment. Exports of gaming services and other tourism services increased by 62.7% and 14.8% year-on-year, respectively. Domestic demand, including private consumption expenditure, government final consumption expenditure and investment also saw an impressive 3.4% year-on-year increase.

Private consumption expenditure grew by 10.9%, with household final consumption expenditure in the domestic market and abroad rising by 9.1% and 23.1% respectively.

The positive economic sentiment has also facilitated an increase in investment, with gross fixed capital formation rising by 13% year-on-year, marking positive growth for four consecutive quarters.

This suggests that businesses and investors are regaining confidence in Macau’s economic prospects.

In the gaming sector, the first-quarter gambling revenue totaled an impressive MOP57.3 billion, successfully achieving 26.5% of the full-year target of MOP216 billion.

The MEA has deemed this progress to be in line with its expectations.

However, it warned that challenges remain.

While tourists have been returning to Macau in large numbers, local consumption has declined as some small businesses closed under economic pressures. High interest rates have also burdened companies with capital turnover and debt repayment, pushing up non-performing loan ratios in the banking system.

The association pointed to an unbalanced recovery so far, characterised by strong tourism but sluggish domestic spending.

Meanwhile, the Consumer Price Index (CPI) rose 0.92% over the same period, mainly driven by higher prices in education, health, and clothing and footwear, which may put pressure on consumer spending and the overall economic recovery.

The price indexes of food and non-alcoholic beverages, housing, and fuels also increased compared to the same month last year, while the price indexes for transport and communications decreased year-on-year.

The implicit deflator of GDP, which measures the overall changes in prices, went up by 2.3% year-on-year to 106.8, indicating that the recovery is accompanied by inflationary pressures.

The strong economic performance in the first quarter of 2024 suggests that Macau’s recovery is gaining momentum, as the territory capitalizes on the rebound in tourism and gaming activities. The decline in funding costs for the banking sector also indicates improved financial conditions, which could further support the ongoing economic revival.

However, policymakers will need to closely monitor the rise in consumer prices to ensure the recovery remains sustainable and balanced.

Several lawmakers have also expressed concerns last year over what they called the lack of a return of residents’ quality of life, post-pandemic.

Lawmaker Ella Lei previously noted that while economic recovery is already underway and major companies are returning to generating profit, the same cannot be said for most of Macau’s population, as families continue to struggle to make ends meet.

Lei noted inflation and interest rate rises are affecting the lives of the general population, with families calling for a reduction in the price of goods as well as support measures for the city. Staff Reporter