The International Monetary Fund (IMF) predicts that growth in the VIP gaming market in Macau will be subdued in the medium term. The fund issued a written statement on Thursday – accompanied by a 66-page report – that offered the prediction in the light of discussions in April between IMF officials and Macau officials.
The IMF forecast that the annual rate of growth in gross domestic product (GDP) in Macau would be 4.3 percent this year and plateau around 4 percent in the medium term. Macau’s GDP increased by 4.7 percent year-on-year in real terms last year, according to the city’s Statistics and Census Service. GDP was 9.7 percent for 2017.
The IMF said tourism would drive Macau’s growth in the medium term. The fund said the revenue Macau gains from tourists, apart from the most free-spending gamblers, would grow, but that growth in the VIP gaming segment would be more subdued.
Such developments are in line with the efforts of the Macau authorities to give drivers of steadier growth greater importance in the economy, the IMF statement noted.
“The main driver of projected medium-term growth is tourism, with non-VIP tourism further expanding, but more subdued VIP gaming growth, in line with authorities’ diversification efforts towards more stable sources of growth,” said the IMF.
However, the fund’s statement warns: “Growth risks are tilted to the downside”. The IMF report that the statement introduces added that most of the threats to the Macau economy emanate from mainland China.
The report gives a warning that any worsening of the trade row between the United States and China might harm Macau by reducing the inflow of visitors from the mainland and by potentially reducing investment in the city by the three U.S. operators of casinos there.
The IMF said its executive directors had expressed their support for the efforts of the authorities in Macau to make growth more resilient by reducing the dependence of the economy on gaming. “Prudent macroeconomic policies and high reserves provide strong buffers against shocks,” the report said.
The IMF directors “commended the progress made by the [Macau] authorities and agreed with the principle of diversification towards mass gaming and non‑gaming tourism, and bolstering financial-sector development,” added the report.
The IMF “agreed with the principle of diversification towards mass‑gaming and non‑gaming tourism and bolstering financial sector development,” highlighted the fund’s statement.
“They [the directors] noted the importance of supportive policies, including advancing infrastructure plans to ease supply‑side bottlenecks and fostering a highly educated workforce,” it added.
The IMF directors welcomed the strengthening of the framework in Macau for countering money-laundering and terrorist financing, and called for the push on those fronts to be sustained, particularly in the gaming industry, the statement said.
The IMF said additionally that the economy of Macau had begun growing again in the middle of 2016, and that growth in gaming and tourism revenue regained its strength in 2017 and early last year.
The fund said growth had moderated in the second half of 2018, as investment weakened and custom from free-spending visitors declined as a result of the deleveraging effort in mainland China and the trade row between the U.S. and the mainland.
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Francis Lui Yiu Tung
Vice chairman of Macau-based casino operator Galaxy Entertainment Group