The Macau government on Tuesday announced immediate implementation of austerity measures to control spending, as casino gross gaming revenue (GGR) in the first eight months of 2015 fell below the monthly average target of MOP20 billion (US$2.5 billion) set for the full year.
The government aims to save approximately MOP1.4 billion in the current fiscal year with such spending cuts, it said in a statement.
The austerity measures include: requesting government departments and autonomous services “to freeze” 5 percent of the budgeted consumption expenditure; freeze 10 percent of the budgeted investment spending (excluding investment in big projects); and for autonomous bodies to cut on supplemental expenditure.
“These measures will not affect spending related to social welfare or to the government’s investment plan,” the government reiterated in Tuesday’s statement.
The announcement comes on the heels of official data showing an August GGR tally of MOP18.62 billion, down 35.5 percent year-on-year. The August numbers – published earlier on Tuesday – mean that Macau’s accumulated GGR for the calendar year to August 31 now stands at MOP158.88 billion, a fall of 36.5 percent on the same period in 2014. The monthly average GGR for the first eight months of 2015 stands at MOP19.86 billion.
The Macau government amended the 2015 budget in March, revising down its estimate for average gross monthly gaming revenue to MOP20 billion, down from an earlier estimate of MOP27.5 billion.
“The measures are entirely internal to the government (e.g. cutting expenses on office supplies and consumables) and as of now, the government has no plans to make any cuts to various popular social welfare programmes or to its own headcount,” Grant Govertsen, analyst at Union Gaming Securities Asia Ltd, said in a note on Tuesday.
“We note that during the second quarter of 2015 the government ran a budget surplus of MOP8.6 billion (US$1.1 billion) and the current fiscal reserve is approximately MOP350 billion (US$44 billion),” Mr Govertsen added.
The Macau government fiscal surplus was down 59.1 percent year-on-year in the first seven months of 2015 to MOP27.2 billion. The government’s take from direct taxes on gaming dropped 35.7 percent year-on-year in the seven months to July 31 – but it still brought in 80.5 percent of the government’s total revenue in the period.
The implementation of the spending cuts comes after data on Monday showing Macau’s economy shrunk 26.4 percent year-on-year in the second quarter – its fourth straight quarter of contraction and the weakest since the first quarter of 2011.
The gaming industry is the major source of Macau’s fiscal revenues. The government levies an effective tax rate of 39 percent on casino GGR – 35 percent in direct government tax, and the remainder in a number of levies to pay for a range of community good causes.
In July, Lawrence Ho Yau Lung, co-chairman and chief executive of casino firm Melco Crown Entertainment Ltd, said Macau casino operators might have to consider more cost-cutting measures as GGR in the city keeps falling.
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Summit Ascent, lead developer of Tigre de Cristal