A new report from the International Monetary Fund (IMF) indicates that Macau’s gross domestic product (GDP) won’t return to pre-pandemic levels until 2025. The gaming-centric economy, which has been especially undermined by the pandemic, has left the city in a vulnerable position for the duration, and reaffirms the need to diversify business in the city.
According to Inside Asian Gaming, Macau’s GDP dropped 54 percent in 2020 before expanding by 18 percent last year. The IMF expects expansion by a further 15.5 percent in 2022 and 23 percent in 2023 before converging to its long-term potential of around 3.5 percent over the medium term. The recovery should be driven by the return of international tourism and domestic demand.
The report noted that “the collapse of economic activity” in 2020, “mostly on account of weak services exports, highlighted the Macau SAR’s overreliance on the gaming industry.”
A resurgence of Covid-19 is the wild card in this scenario, and could affect the medium‑term viability of the gaming sector. The IMF said a “multiprong package of structural reforms is needed to bridge the gap in skill composition and overcome barriers to economic diversification.
“Advancing the government’s diversification agenda will require investments in skill building and infrastructure, including for digital infrastructure, enhancing the effectiveness of public institutions, and improving business environment. The integration with the GBA provides opportunities for [the Macau] SAR to access a larger pool of skilled labor and offshore some economic activities.
“The cooperation between different government agencies responsible for the diversification agenda should be strengthened to enhance the effectiveness of the government’s diversification efforts.”
The need to diversify is heightened by uncertainty created by proposed amendments to Macau’s gaming laws. Combined with Beijing’s crackdown on cross-border gambling and the decline of the junket industry, those factors “cloud the outlook of the gaming sector.”
“Macau’s recovery is expected to continue going forward, but it will take time before the economy fully regains pandemic-induced losses,” the report said. “The gradual return of foreign tourists and the strengthening of domestic demand will support the near-term recovery, while increasing investment linked to the issuance of new gaming concessions and further integration with the GBA will boost medium-term growth.
“However, given the depth of the economic losses during the pandemic, the level of GDP is expected to surpass its pre-crisis level only in 2025. In the absence of rapid progress towards economic diversification, the current account balance is set to return to pre-pandemic levels as tourists return to [the] Macau SAR.”
Meanwhile, according to GGRAsia, Macau gaming executive and former legislator David Chow Kam Fai has urged local authorities to support local core industries to recover from the pandemic. “I don’t know what the government is doing,” Chow said. “Do they even know themselves? The gaming industry is very important for Macau, it has continued for 20 years… Talk to the Chinese government. The gaming industry in Macau is important. Don’t worry about going on a new program, concentrate on the old industries and make them grow. It is the only way to survive in the next five years.”
