Macau economy expected to shrink 0.8 percent by year-end

The University of Macau’s (UM) Department of Economics and Center for Macau Studies yesterday released their Macroeconomic Forecast for Macau 2019-2020, projecting that the city’s gross domestic product will decline by 0.8% across the whole of 2019.

The latest figures released by the Statistics and Census Bureau (DSEC) show that the economy of Macau has entered recession, after contracting by 2.5% in the first half of 2019. Macau’s economy contracted by 1.8% year-on-year in the second quarter of 2019, an improvement compared to the 3.2% decline in the first quarter. A technical recession is defined as two consecutive quarters of negative growth.

“Economic uncertainty continues to affect Macau’s economic growth in 2019 and 2020,” the UM department reported.

“Overall, Macau’s GDP is forecast to decline by 0.8% in 2019. The slowdown is expected to continue in 2020 and Macau’s GDP is forecast to decline by 0.9%,” the department predicted.

“If favorable outcomes are coming from the China-U.S. trade negotiation and Chinese economic growth stabilizes, Macau’s economic growth is expected to be more optimistic. However, if Sino-U.S. trade negotiations break down and Chinese economic growth continues to deteriorate, Macau’s economic growth becomes more pessimistic.”

The Economist Intelligence Unit (EIU) issued its own growth forecast in its latest report this month, suggesting that economic growth would return in the second half of this year, but that 2019 would end with a 1% contraction on balance.

Macau’s exports of service are expected to grow at a rate of 1.5% in 2019, while the exports of goods will decline by 15.5%, according to the department. Next year, the exports of goods will fall a further 3%, the department noted, while services exports will remain unchanged. Concomitant with the weak growth in consumption and investment, imports of goods are expected to rise slower by 0.3% and 1.8% in 2019 and 2020 respectively.

Amid the deterioration in exports of services, the imports of services are forecast to decrease by 11.6% and 3.2% in 2019 and 2020 respectively.

As for domestic demand, private consumption spending is expected to grow slower, at rates of 2.6% and 2.5% in 2019 and 2020 respectively.

Inflation, as measured by the change in the Composite Consumer Price Index, is expected to mostly hold stable at 2.7% and 2.4% in 2019 and 2020 respectively.

The labor market continues to be tight amid limited labor supply. The unemployment rate is forecast to be 1.8% and 1.9% in 2019 and 2020. Excluding non-resident workers, the unemployment rate of residents is expected to be 2.4% and 2.5% in 2019 and 2020.

Median monthly employment earnings are forecast to be MOP16,575 and MOP16,655 in 2019 and 2020 respectively.

As for domestic demand, the UM department noted that if investment continues to shrink, the modest growth of private and government consumption expenditure may not be enough for Macau’s gross domestic product.