Macau’s economy is heading for its biggest recession in 33 years if current gaming revenues persist for the rest of the year, with GDP shrinking 14.7 percent, according to the economics department at the University of Macau.
If the ‘new norm’ of MOP20 billion (US$2.5 billion) monthly gaming revenues persists for the rest of the year, the Special Administrative Region’s GDP will decline to MOP323 billion from MOP378.8 billion in 2014, according to the department’s 2015 Macroeconomic Forecast.
“If the gross gaming revenue continues at MOP 60 billion per quarter, Macao’s GDP is expected to decline at a rate of 14.7 per cent, ranging from a pessimistic estimate of 20.4 per cent to an optimistic estimate of 9.4 per cent in 2015.”
“Data and our forecast indicate the possibility of continuous adjustment of Macao’s growth in 2015. Given that the gross gaming revenue is greatly influenced by government policies and is subject to adjustment throughout the year, as reflected by short-term fluctuation, we will update the forecast to reflect the possible adjustments.”
The forecast is a mid-point between the ‘pessimistic’ scenario of a 20.4 percent decline, or a more optimistic 9.4 percent drop, in GDP. Macau could find itself in the worst economic situation since 1982, when GDP dropped 7 percent, during the height of the 1998 financial crisis.
However, the industry may take some comfort from the outlook that the second half of the year should provide a boost for the economy.
“The opening of new casinos and hotels in the second half of the year should ease the decline.”
Also in the report, the university predicts the city’s exports of services will decrease by 22.8 per cent year-on-year to MOP293.4 billion from MOP380 billion, due to the city’s major market of services exports – Hong Kong – being affected by the slowdown of the Chinese economy, while the growth rates of imported services is estimated to decline by 26.3 per cent in 2015.”