Country Report Macau December 2008

Outlook for 2009-10

Despite Macau's new-found prosperity, political discontent is rising, to the growing concern of the Chinese government. However, Macau's chief executive, Edmund Ho, whose popularity has fallen, should remain in power until the end of his second and final five-year term in 2009. Economic policy will focus on the smooth progress of gambling sector liberalisation. The rate of GDP growth will fall in 2009-10, owing to slow growth in visitor arrival numbers and a major slowdown in investment in casino operations.

The political scene

Public discontent is rising across Macau amid growing inequality. Tighter restrictions have been placed on Chinese tourists visiting Macau, owing to concerns over the amount of money being lost in the territory's casinos. Anti-subversion legislation is being introduced in Macau, the enactment of which is required by its mini-constitution, the Basic Law. The bill should pass through the Legislative Assembly smoothly, and is not expected to lead to any of the mass protests that Hong Kong experienced when trying to pass a similar version of the law in 2003.

Economic policy

The government recorded a considerable budget surplus of MPtc16.6bn (US$2.1bn) in the first half of 2008, following rapid growth in both public spending and revenue collection. The construction of a 29-km bridge linking Hong Kong, Macau and Zhuhai, a city in mainland China, has been granted approval and construction could start in 2009.

The domestic economy

Real GDP growth is slowing sharply. In the third quarter of 2008 the economy grew by 11.3% year on year, down from 32.3% in the first quarter. The main cause of the slowdown in growth was a big contraction in gross fixed capital formation, which fell by 25.2% year on year in the third quarter. Unemployment is gradually increasingit rose from 2.8% of the labour force in June to 3.1% in October. Consumer price inflation remains elevated, owing to high food price inflation and booming demand. The rate in October was 8.8% year on year, down only slightly from the rate of 9.1% reached in the first quarter of 2008. The growth in tourist visitor arrivals is slowing rapidly following the introduction of tighter restrictions on Chinese tourists wishing to visit the city.

Foreign trade and payments

The value of total merchandise exports fell by 13.9% year on year in the first nine months of 2008 to MPtc12.9bn, with the decline accelerating as the year progressed. Domestic exports fell by 19.2% to MPtc7.9bn.

This report covers the following industry codes:
SIC Code: 47;15;70
NAICS Code: 48;23;72