IMF projects this year’s growth at 14%

The International Monetary Fund (IMF) Mission has surveyed Macau’s macroeconomic and financial assessments, concluding that the local economy is “robust”. The preliminary conclusion from the IMF forecasts economic growth of 13.9% this year, as well as a return to pre-pandemic levels in 2025.

The forecasts for Macau were conducted between Feb. 21 and March 6.

At the end of the survey, IMF analysts highlighted that the local economy achieved a “robust recovery as travel to the rest of the world fully resumed.”

The institution recalled that the gaming sector had a “stellar performance,” bolstered by the mass tourism segment, while non-gaming services export also expanded strongly.

“However, the growth momentum slowed in the last quarter of 2023 and the recovery was uneven, with less impressive growth in other non-gaming sectors,” it added.

“Headline inflation hovered around 1% in 2023, due to declining rental prices. With economic recovery, fiscal policy consolidated in 2023, driven by withdrawal of pandemic relief measures, higher gaming revenues, and under-execution of current spending,” the IMF also recalled.

Concurrently, the institution also noted that sufficient capital and liquidity buffers could support the resilience of Macau’s financial system against future and external shocks.

Addressing new rules and regulations recently approved, the IMF said that the “reformulated Financial System Act enhanced the flexibility of Macau’s legal framework for financial regulation and supervision, laying the legal basis for promoting financial innovation.”

The mission also noted that “digitalization has notably increased in Macau’s economy” and suggested the government increase investments in infrastructure, education, and occupational and on-the-job training, as well as healthcare.

Such investments “would improve Macau’s productivity and support diverse economic policies.”

According to the institution, Macau has experienced a significant increase in digitalization over the past decade, “although it still lags regional peers.”

Therefore, it has suggested improving the design and targeting of Macau’s R&D tax incentives, scaling up public spending on basic research, and SME’s access to finance and digital technologies would help further support digitalization and innovation.

Another of the topics analyzed by the IMF team was integration into the Greater Bay Area, with the mission leaving recommendations for Macau to “leverage opportunities arising from its integration into the Greater Bay Area through comprehensive economic structural reforms.”

“Economy-wide structural reforms that improve efficiency and resource allocation would enable Macau SAR to capitalize on the knowledge base available in the GBA,” the report stated.

“The authorities should be cognizant of possible negative spillovers, trade distortions, and governance risks related to their industrial policies (IP),” the IMF warned.