Macau’s economy is ‘expected to rebound at a double-digit rate for the whole year of 2023,’ according to the SAR’s monetary authority (AMCM).
In a report on Macau’s Monetary and Financial Stability, the AMCM attributed the strong growth to a ‘low bass effect’, given the city’s lackluster performance in 2021.
But one of the strong impetuses driving the recovery is the fact that the new gaming concessions were signed and came into effect on January 1st, with growth possibilities driven by the new investments promised by the six concessionaires.
Over 91 percent of the MOP118.86 billion ($14.79 billion) in investment pledged by the operators over the 10-year term of their new licenses is dedicated to non-gaming investment.
However, a further 20 percent non-gaming investment will be required of the operators if yearly gross gaming revenue tops $22 billion, a figure which analysts at Morgan Stanley predict could happen well before 2027 – the first year in which a possible reduction of the additional levy could be applied.
The main elements to underpin Macau’s economic recovery, notes the AMCM, are the pickup in external demand, as entry restrictions are lifted (entrants from mainland China, Hong Kong and Taiwan no longer require testing and foreigners are no longer required to quarantine). The city is also moving towards a ‘full re-opening of borders’.
As seen by Chinese New Year visitation, with peak daily entrants topping 90,000, pent-up demand, particularly from China and Hong Kong, will strongly accompany the promotional campaigns deployed both by the city’s tourism bureau and the integrated resorts themselves.
However, the monetary authority warns that ‘as a small open economy, Macau’s economic recovery would hinge on the evolution of the pandemic and development of major export markets’.
One of the primary drops seen in 2022’s economic outcome was in services exports, driven by the fall in casino revenues, with gross gaming revenues topping out at just MOP86.86 billion ($10.77 billion) for FY22, the worst-ever yearly revenue on record.
According to AMCM data, 1H22 saw exports of services fall by 29.4 percent, with GGR dropping 46.2 percent. Of this, VIP baccarat revenue fell 61.3 percent and mass market fell 38.1 percent. GGR performance in 3Q22 fell 70.1 percent, leading to a drop in the exports of services by 46.7 percent, with net service exports down 58.5 percent, becoming ‘the largest drag of the economy, with a negative contribution of 26.5 percentage points to output growth’.
Moving forward, the AMCM notes that the government’s proposed ‘1+4’ strategy – with the main pillar being Macau’s tourism and leisure industry, supported by big health, financial services, high tech, exhibitions and conventions, commerce and trade and culture and sports – will allow for non-gaming to reach 60 percent of Macau’s GDP.
Already the authority notes that the financial industry has become Macau’s second-largest GDP contributor, with its contribution rising from 4 percent in 2011 to 15.4 percent in 2021.
It notes that ‘the financial sector would take a vital role in driving future growth’.