The Macau Economic Association has announced that it expects the city’s Prosperity Index to remain at a low level – 1.8 or 1.9 points – from August to November, with the July index at 1.2 points.
The index for August has not yet been released, but the association estimates it to be 1.8 points.
Justifying the disappointing outcome and pessimistic estimation, the association is pointing the finger at the June 18 Covid-19 outbreak, which put nearly 2,000 people in medical or semi-medical confinement, during which time six elderly patients succumbed to the disease.
Tourist arrival figures, hotel occupancy rates and gross gambling revenue (GGR) were also seismically impacted by the outbreak – not to mention that commercial activities were nearly completely suspended for 13 days in mid-July.
Moreover, the association pointed out, the M2 money supply has fallen for the past nine months. Cargo imports, the only indicator used to calculate the Prosperity Index, which remained satisfactory in June, also saw a year-over-year plunge of 71.5% and month-on-month plunge of 58.2% in July to MOP4.39 billion. This brought the score of this indicator from 8 points to zero points, explaining the low index for July.
Commenting on the forecast for the August index, the association pointed out that the GGR in August was nearly MOP2.2 billion, with a gradual warming of the tourism market.
Discussing the overall economic situation and outlook, the association highlighted that the pressure on an interest rate increase for local banks will become more obvious. Judging from the US Consumer Price Index (CPI) for August being 8.3% higher than for July, the market expects the Federal Reserve to further increase interest rates to 0.75%.
It worries that if the American interest rates rise as forecast, banks in Macau will feel pressure to follow suit, owing to the fact that their costs will rise under such conditions. However, it added that local people – mortgagors, for example – will see heavier burdens in terms of interest. As such, the recovery of the local economy will experience greater uncertainties as spending power will inevitably shrink.
The association added that mainland China will represent a strong backing for Macau’s recovery.
