Macau’s economic growth to slow in 2019, EIU forecasts

Macau’s economic growth is expected to slow by more than three percentage points this year from 9.1 percent in 2017 to 5.8 percent, before dropping back to 3.9 percent in 2019, according to the latest forecast from the Economist Intelligence Unit (EIU) on the region.

Predicting an average growth rate of 4.8 percent for the two years under review, the EIU said economic growth, despite being in decline, will be helped by growth in gambling and continued public spending on social housing, which will support investment.

The report expects that government efforts towards economic diversification will achieve little in 2018/2019, although gaming operators are expected to invest heavily in tourism not directly related to gambling, which will help expand leisure and entertainment services.

The EIU also predicted that the Macau government will continue to achieve positive budget balances of 8 percent of gross domestic product (GDP) this year and of 7.1 percent in 2019, after accounting for one tenth of the budget expenditure last year, and that the unemployment rate will remain historically low, with an almost natural rate of 1.9 percent over the two years under review.

The inflation rate is expected to increase, driven by the slight appreciation of the Chinese currency against the pataca, returning to slightly above the value recorded in 2016 (2.4 percent) and more than double the amount recorded in 2017 (1.2 percent), with positive changes of 2.7 percent and 2.8percent, in 2018 and 2019 respectively.

The EIU report mentions that it is not likely the direct 35 percent tax on gross gaming operators will be reduced over the next two years and recalls that that burden is much higher than in other jurisdictions.

This tax burden, coupled with the moderate growth in public spending forecast for 2018/2019, means the government will likely raise significant budget surpluses, added to the reserves that have been steadily growing since the gaming sector was liberalized in 2001. MDT/Macauhub