Pandemic measures causing GDP collapse

Economists are sounding the alarm over the Gross Domestic Product (GDP) results for Macau this year.

On the line seem to be the pandemic prevention and control measures that are driving local GDP to the point of collapse.

Official statistics released show that at the end of the second quarter of this year (Q2) the GDP of Macau recorded a 39.3% fall when compared with the same period last year.

This figure is even more relevant if compared with the results of the first quarter of the year (Q1), when the GDP also fell, but in a more moderate manner (-8.9%).

The results of Q2, when compared to the same period of 2020, show that local economic performance has fallen some 66.3%, that is, by almost two-thirds.

Local economists are not just alarmed by these figures but also anticipate that the results from the second half of this year could be as bad as the first, with 2022 to be historic for negative reasons.

“These numbers are alarming and represent a brutal drop,” local economist José Luís de Sales Marques said to Hoje Macau newspaper.

Despite considering the figures worrying, Sales Marques said that they are not that surprising considering the effects of the measures to fight the pandemic, that lasted for a very long period.

On the same note, Albano Martins also outlined a very bleak scenario for the local economy.

“The data is indeed alarming, but it was just natural that the GDP would fall substantially since the economy [was] at a standstill. The zero covid policy has prevented it from growing as people refrain from consuming, and the economic drivers with particular relevance to the gaming sector, do not have the necessary components [visitors] to be able to grow,” Martins said to the same media.

Another economist, António Félix Pontes, a former member of the board of directors of the Monetary Authority of Macao, added that the “local economy is sick as a direct result of the implementation of the zero Covid policy, which has been much more efficient in causing devastating economic effects,” he said.

For Pontes, the Covid-19 policies of the government have had a catastrophic impact on the economic health of Macau, with consequences still unpredictable.

Light at the end of the tunnel 

Regarding the potential recovery of the local economy, Sales Marques said that some recovery can be expected in Q3 as a result of the Golden Week of the National Day holidays period, which includes largely the first week of October, although noting that “it is difficult to say to what extent this [week] will account for a better performance of the GDP.” “We have already lost half a year, and we will see if we can at least prevent GDP to fall any further. We are assuming that the [Covid-19] policies will be unchanged until the end of this year. For the next year we will have a new situation with the entry into force of the gaming concessions,” Sales Marques concluded.

Less optimistic, Martins said that the drop in GDP will continue not only for the rest of 2022 but can also extend throughout 2023, depending on government policies.

For Martins, in order to have a realistic approach to the topic, it must be considered that the local economy will hardly return to pre-pandemic figures. This is due not only to the pandemic and zero-Covid-19 case policy but also due to a clear message that there are intentions to restrict gaming activities to the essential minimum.

Also sharing a similar opinion, Pontes noted the recurring use by the government of the Financial Reserves, from which around 168 billion patacas have already been withdrawn, a figure that represents roughly a 25% reduction of its assets.

With the growing number of companies closing their doors and the direct effect on the unemployment rate, it is difficult to see, at this point, any light at the end of the tunnel.

In a reply to the Times, Professor Kwan Fung, Assistant Professor at the University of Macau and advisor of the Economic Development Committee of Macau, said “Since the most recent outbreak [of Covid-19] happened in the second half of June and lasted until mid-August, the Q3 GDP growth will be affected tremendously.”

For Kwan, the uncertainty over the anti-pandemic measures makes it very difficult to any economic analyst to predict the timing of economic recovery, given that Macau relies a lot on services driven by the flow of customers.

According to Kwan, the Macroeconomic Model is about to revise the GDP forecast for 2022, “in which one might expect an inevitable substantial downward adjustment.” 

Touching the subject of ways of economic recovery, other academics recommend the government to look at “the model of the development of the Internet economy of mainland China and vigorously develop e-commerce, internet shopping, video clip marketing and so on.”

In a paper on the government’s pandemic response, academics from the University of Macau and the United Nations University Institute (see p5), state that “the government can also coordinate and assist in terms of payment, logistics, and management, to increase the size of Macau’s economy and facilitate the rapid recovery and development of the economy.”