Country Report Macau December 2009

Outlook for 2010-11

Addressing rising discontent will be one of the main challenges facing Fernando Chui Sai On, who was elected as Macau's next chief executive in July and will take office on December 20th. He will also need to combat rising corruption and introduce measures to support the struggling economy. Real GDP is forecast to recover gradually in 2010-11, following a sharp contraction in 2009 amid falling visitor numbers and a slump in new casino investment. The government, which is in a healthy financial position, will come under pressure to increase spending to support growth. However, what would really help to boost economic growth would be a decision by the Chinese government to abolish its policy of limiting the number of mainland visitors to Macau.

The political scene

Mr Chui, who will replace Edmund Ho as chief executive in December, has pledged to diversify the economy and reduce its current over-reliance on the gambling sector and to rid the territory of corruption. The government is considering plans to boost education levels in the city-state by lifting the minimum age for employment at a casino from the current 18 years to 21 in order to encourage Macau students to further their education levels.

Economic policy

During the past year the Chinese government has tinkered with its visa policy by first loosening and then tightening visa restrictions on mainland-Chinese tourists visiting Macau. Total government expenditure increased by 42.9% year on year in the first nine months of 2009, to MPtc20.3bn (US$2.5bn), resulting in a budget surplus of 20.4bn during the period.

The domestic economy

Real GDP contracted by 13.8% year on year in the second quarter of 2009, marking the third consecutive quarter of declining GDP. A sharp fall in services exports, the main driver of growth in Macau, was responsible for the fall in GDP. A surge in gambling revenue in the third quarter should, however, support growth prospects for the remainder of 2009. The value of retail sales grew by 10.8% year on year in the second quarter; growth in retail sales had peaked as high as 46.4% in the first quarter of 2008. The composite consumer price index declined by 1% year on year in September 2009, marking a return to deflation after five consecutive years of inflation since the third quarter of 2004.

Foreign trade and payments

The value of total merchandise exports plunged by 53.5% year on year to MPtc6.4bn in the first ten months of 2009. The slump in exports was mainly a result of the poor performance of domestic exports rather than re-exports.

This report covers the following industry codes:
SIC Code: 82;70
NAICS Code: 61;72

• Summary
• Basic data
• Political structure
• Economic structure: Annual indicators
• Economic structure: Quarterly indicators
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Economic growth
• The political scene: Tackling corruption will be a big challenge for Mr Chui
• The political scene: Proposals to improve education are considered
• Economic policy: The Chinese government relaxes visa restrictions
• Economic policy: The budget remains in surplus, despite a surge in spending
• The domestic economy: Data show that GDP shrank again in the second quarter
• The domestic economy: Retail sales growth remains positive
• The domestic economy: The labour force continues to shrink
• The domestic economy: Deflation returns in September
• The domestic economy: The decline in visitor arrivals appears to have ceased
• Foreign trade and payments: The export plunge deepens, and the trade gap widens