The Macau economy is expected to contract by 21 percent in 2015 but return to growth in 2016, with an expected rate of 5 percent, according to analysts from the Economist Intelligence Unit (EIU) in its latest report on the country.

2015 is also the year that gross fixed capital formation (investment), will accompany the GDP contraction trend and record a fall of 13.0 percent to start growing again in 2016 at a rate similar to economic growth, of 5 percent.

The other indicators analysed by the EIU remain without major changes, including inflation, which this year is expected to stand at 4.5 percent, down half a percentage point compared to the 6.0 percent rate recorded in 2014 and grow by 20 basis points to 4.7 percent in 2016.

The biggest change is expected to be in the budget surplus as a percentage of GDP, which has been in decline since 2013 and the EIU analysts predict this trend will continue, dropping to 17.8 percent this year and to 16.6 percent in 2016 .

The main reason given for this sharp contraction of Macau’s economy, which in 2014 contracted by 0.4 percent, according to the EIU, is the anti-corruption campaign launched in China in 2014, which resulted in a sharp drop the revenue from casinos, most particularly in the so-called VIP segment.

However, the EIU said, the gaming sector, the main economic activity in Macau, will start expanding in the last few months of 2015, albeit from a lower base, as the VIP segment is replaced with the mass market segment.

The EIU also noted to the positive effect that the conclusion of several hotel and casino projects should have on the Macau economy, which should lead to higher medium-term growth. (macauhub/MO)