Report | Macau’s GDP expected to grow 3.2 percent

The Department of Economics, University of Macau (UM) released a report stating that the region’s economy is beginning to recover and is forecast to “continue its steady growth in 2017.”

Titled the “Macroeconomic Forecast for Macau 2017,” the report states that “for the overall economy, Macau’s GDP (Gross Domestic Product) is expected to increase by 3.2 percent, ranging from a pessimistic forecast of -6.9 percent to an optimistic rate of 13.2 percent.”

Nevertheless, there remains a “possibility of continuous adjustment of Macau’s growth in 2017, given that gross gaming revenue is highly influenced by government policies and may adjust greatly throughout the year, reflected in short-term fluctuations,” according to the Macroeconometric Structural Model of Macau (developed by the UM Department of Economics).

The report predicts a recovery in both the exports of services and imports, which are expected to surge by 2.5 and 4.0 percent respectively in 2017.

Private consumption suffered a slowdown in 2016, in particular in durable goods, but is expected to grow at 1.8 percent this year.

The region’s investment in constructing new casinos and hotels is expected to continue to boost this sector, with the total investment expected to grow by 3.8 percent.

Amid sluggish demand from local residents, it is expected that inflation (as measured by the change in the Composite Consumer Price Index) will continue to decline to 2.1 percent in 2017.

For the aggregate economy, the GDP price deflator is forecast to increase by 2.2 percent.

The labor market will remain stable with a forecast unemployment rate of 2 percent. Median monthly employment earnings are generally forecast to increase by 1.2 percent in 2017.

Analyzing the results of 2016, the report acknowledges that the region’s real GDP growth turned positive, with a 4.0 percent year-on-year increase and MOP 86.7 billion recorded in the third quarter of 2016.

However, the report notes that the region’s real GDP growth declined by 12.4 and 7.0 percent on a year-on-year basis in the first and second quarters of 2016 respectively.

The report also states that last year, the local economy was driven mainly by external demand for services from mainland China, with real estate and industrial production sectors growing.

It also notes a recovery in Chinese visitors’ spending, in particular on gaming activities.

The export of services also grew 3.3 percent year-on-year to MOP64.9 billion after an adjustment period of almost three years. Most of these services (MOP 41.4 billion) were gaming related.

In the third quarter of 2016, the nominal gross gaming revenue was MOP55.2 billion, up 1.1 percent year-on-year and 6.5 percent quarter-on-quarter while the revenue from the VIP baccarat was MOP 28.6 billion, decreasing 1.2 percent year-on-year but up 7.7 percent quarter-on-quarter.

It also said that the opening of new and large-scale gaming resorts in the third quarter of 2016 contributed to a “private gross fixed capital formation [which] increased by 2.4 percent year-on-year in the third quarter to MOP 19.5 billion.”

Also increasing was government gross fixed capital (1.8 percent year-on-year), although this was less than other industries.

Real estate transaction activity cooled down, falling by 19.5 percent on the total number of resident units purchased (2,399 units, amounting to MOP 14.5 billion).

The inflation rate was also down amid sluggish demand from local residents.

For the aggregate economy, the GDP deflator increased by 0.2 percent year-on-year in the third quarter of 2016, in tandem with the slowdown in the consumer price.

The labor market has been stable in both number of those employed and earnings, with the median monthly employment earnings being around MOP15,000 in the third quarter of 2016. This is the same as the third quarter of the previous year.

Similarly, earnings in the gaming sector remained the same as the third quarter of 2015 at about MOP19,000. This sector accounted for the largest share of the employed population. RM