Macau’s real gross domestic product (GDP) might contract “mid-teens” for the whole of 2015, said the Monetary Authority of Macao in its latest monetary and financial stability review, published last week.
It cited “deterioration in gaming revenue” as a factor, adding that “service exports’ contribution to overall growth is significant”. Such service exports include casino gaming.
Macau’s GDP for the first quarter of 2015 shrank by 24.5 percent year-on-year in real terms, The city’s aggregate gross gaming revenue (GGR) for the first six months of 2015 stands 37.0 percent lower than in the same period in 2014, at about MOP121.65 billion, according to government data.
The city’s monetary authority stated in its latest report: “A milder year-on-year dip in GGR in the second half of 2015 than the first half of the year is likely, mainly owing to the low base of the second half of 2014 and the stepping up of promotion efforts by the [Macau] SAR Government and gaming operators. Furthermore, there has been a weakening sign of year-on-year contraction on GGR since March 2015.”
Contraction in GDP “could slow to low teens in the second half, depending on the gaming performance,” stated the monetary authority.
Private sector tourism resort projects in Macau would continue to drive the local economy’s capital formation. And public infrastructure projects, “if well-executed”, would also help boost investment, said the body.
“The stable double-A credit rating of Macau would continue to provide the fundamental support for gaming operators to obtain debt financing and bank credit,” said the monetary authority.
Fitch Ratings Inc said in a report on May 29 that U.S.-based casino operators Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Resorts International – that all have investments in Macau casino operations – would all be able to cope with Macau’s ongoing gaming downturn without straying significantly from their current rating thresholds.
Macau gets much of its public revenue from taxes on gaming, levied at an effective rate of 39 percent of the gambling gross.
The monetary authority said that despite public revenue falling nearly 34 percent in the first five months of the year and public expenditure – excluding that of public autonomous agencies – increasing by nearly 49 percent, the territory’s fiscal balance “still managed to register a comfortable surplus” of MOP25.6 billion. That was “equivalent to 123.0 percent of the public expenditure for the same period this year”, the body added, pointing out “the debt-free status of the SAR government was well-maintained”.
Ratings agency Moody’s Investors Service said in a report issued on July 3 that Macau’s ongoing gaming slowdown was unlikely to cause any significant harm to the credit profile of the city’s government in the short- to medium-term.
“Among domestic demand components, private consumption would perform well due to continuous wage hike and healthy employment growth. Furthermore, public consumption would lend support to growth,” said the monetary authority’s outlook for the second half of 2015.
Unemployment in Macau edged up slightly to 1.8 percent in the three months through to May 2015, although the monetary authority noted wages for Macau residents were supported by “the obvious shortage of local labour supply”. Under current government policy, some jobs, including those for casino dealers, are open only to Macau residents.
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings