The University of Macau’s (UM) Department of Economics and Centre for Macau Studies yesterday released its Macroeconomic Forecast for Macau report for 2019. The report indicated that analysts expect an aggregate annual growth of 2.7 percent in the special administrative region.
In terms of the whole economy, analyst growth expectations vary widely, with the most pessimistic pointing to a contraction of 6.5 percent and the most optimistic suggesting that Macau’s gross domestic product could grow by nearly 12 percent.
The cause of this discrepancy, according to the UM report, is the inherent nature of Macau’s export-led economy, which is highly sensitive to external economic conditions and government policies. “Economic uncertainty continues to affect Macau’s economic growth in 2019,” it said, adding that forecasts “may adjust greatly throughout the year.”
Largely dependent on its behemoth casino sector, Macau’s 2.7 percent economic growth rate pales in comparison to the 14 percent increase in gross gaming revenue seen across 2018, even as that growth slowed in the later quarters of the year.
Considering the entire economy, Macau gross domestic product grew by only 1.6 percent year-on-year in the third quarter of 2018 to reach MOP100.9 billion, down from the 9.4 percent and 5.9 percent year-on- year growth in the first and second quarter of 2018 respectively.
The aggregate growth estimate of 2.7 percent falls 1 percentage point short of global growth projections made by the International Monetary Fund (IMF) in October last year. That projection had been revised downward from one in April 2018, with the IMF highlighting “suppressed activities in […] some major advanced economies” and the “negative effects of the trade measures” as two underlying causes.
Macau’s projected growth is then expected to keep up with other developed economies around the world. For example, gross domestic product in the United States is expected to expand by 2 percent this year, while that of the Euro area is projected to see 1.9 percent growth.
Meanwhile, mainland China – whose economy has the greatest influence on Macau’s growth – will likely see a further slowdown in 2019, due to “the negative effects of the trade friction with the U.S.” and other structural adjustments that are surfacing. The mainland’s economy grew at 6.5 percent in the third quarter of last year, causing a slowdown in Hong Kong – another major market of Macau’s service exports – to 2.9 percent in the same quarter.
Accordingly, Macau’s exports of services are expected to grow at a slower rate in 2019, falling to a rate of 4.2 percent. At the same time, exports of goods are expected to increase by 0.6 percent. Imports of goods are expected to rise by 3.1 percent in 2019. Amid the slower rise in exports of services, the imports of services will expand modestly. The growth rates of imports of services are expected to increase by 4.2 percent in 2019.
For domestic demand, private consumption spending in 2018 continued to grow steadily. It is expected to grow at 4 percent in 2019, while total investment is expected to decline by 7.9 percent in 2019.
Inflation, as measured by change in the composite consumer price index, is expected to hold steady in 2019 at around 3 percent. For the aggregate economy, the gross domestic product price deflator is forecast to increase by 4.1 percent.
The UM report noted that the labor market will likely remain tight this year, with the unemployment rate holding at 2 percent and median monthly employment earnings rising slightly to MOP16,205. Excluding non-resident workers, the unemployment rate of residents is expected to be 2.8 percent in 2019.