EIU forecasts average growth of 7.8% for Macau in 2017/2018

22 June 2017

Macau’s economy is expected to grow at an average real rate of 7.8% this year and 2018, boosted by the recovery in services exports, particularly those related to gambling, according to the latest Economist Intelligence Unit (EIU) report.

The EIU, disaggregating the average growth of Macau’s economy for the two years under review, expects a real rate of 10.3% for 2017 and a real rate of 5.3% for 2018.

Macau experienced a severe economic contraction in 2015, with gross domestic product falling by 21.5%, which was followed by a negative but more moderate drop of 2.1% the next year.

On the basis of predicted economic growth, the EIU expects an increase in household consumption, but gave no exact figures.

One of the areas where household consumption is expected to increase will be in housing, where prices have risen again after falling after the economic downturn.

Public consumption is also likely to register a similar trend, in this case due to higher tax revenues, with EIU analysts saying that Macau will continue to see significant budget surpluses, equivalent to 7.1% of GDP on average.

The document said that it would be practically impossible for the taxes levied on gaming revenues to be revised downwards over the next two years, noting that through direct taxes (35%) and indirect taxes, casino companies would pay around 40% in Macau, which is higher than in Las Vegas, for example.

The EIU notes that Macau’s economy remains very vulnerable to shocks as it is focused on a single sector, the gambling sector, and recalls central government officials’ statements about diversification.

Due to the anticorruption campaign in China, as well as increased competition from casinos opened in various parts of Asia, the document now obtained by Macauhub predicts that gaming revenues should continue to grow, but are not expected to return to the previous high levels.

Gross fixed capital formation, or investment, is expected to contract 8.0% this year before growing by a modest 0.5% in 2018, as major hotel developments are in the final stages, with no new projects in the pipeline. (macauhub)