Macau’s continuing “overreliance” on gaming, and the ongoing potential for setbacks in recovery of the tourism sector from the Covid-19 pandemic, makes the city’s economic diversification an urgent task, says an International Monetary Fund (IMF) report now published in full.
In a summary version, issued in late January, the body had already said it expected Macau’s gross domestic product (GDP) to expand 15 percent this year.
In the full version, agreed with the Macau authorities on March 29, and made public on Tuesday (April 12), the IMF said this year’s GDP expansion was likely to be 15.5 percent.
But the report noted: “Despite a strong policy response, the pandemic took a large toll on the Macau SAR’s economy, highlighting the need for economic diversification.”
The IMF said that amid pandemic-related disruption to inbound tourism, there had been some “collapse” in economic activity, “mostly on account of weak services exports,” and this had “highlighted the Macau SAR’s overreliance on the gaming industry”.
It noted that Macau’s “social protection” spending – including support for the less well-off – “remains relatively low” when compared with the Organisation for Economic Co-operation and Development (OECD) average.
But the IMF stated that Macau’s public-policy spending commitments at a time when its keystone tourism industry was underperforming, meant the city was likely to see a smaller current-account surplus this year.
A number of commentators highlighted to GGRAsia late last year, that the city’s public finances were likely to be affected, if VIP gambling were no longer making a significant contribution to the city’s tax take.
“Due to the still relatively low tourism receipts, the current account surplus in 2021 is estimated at less than half of its pre-crisis level,” said the IMF.
The report added that “large downside risks remain” for Macau. A “resurgence” of the Covid-19 pandemic in terms of its impact on the city’s economy, “could stall the Macau SAR’s near-term recovery and undermine the medium-term viability of the gaming sector”.
The IMF added: “Some uncertainty remains regarding the proposed amendments to Macau’s gaming law, which in combination with the recent ban on the gaming services’ marketing in the mainland, clouds the outlook of the gaming sector.”
The body said that advancing the government’s economic diversification agenda would “require investments in skill building and infrastructure, including for digital infrastructure, enhancing the effectiveness of public institutions, and improving the business environment”.
The IMF said it expected Macau’s GDP growth “to accelerate to 23 percent in 2023 before gradually converging to its long‑term potential of around 3.5 percent over the medium term,” but that the level of GDP was “expected to surpass its pre-crisis level only in 2025″.
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