Country Report Macau June 2008

Outlook for 2008-09

Political discontent is rising in Macau despite the city's new-found prosperity. However, Macau will remain fairly stable, and the chief executive, Edmund Ho, whose second and final term will come to an end in 2009, remains popular. The main thrust of economic policy will be to ensure the smooth progress of gambling sector liberalisation. GDP growth will remain strong in 2008-09 on the back of continued increases in visitor arrival numbers and large-scale investment in the casino and tourism sectors.

The political scene

The central government in the Chinese capital, Beijing, is becoming increasingly concerned about rising political instability in Macau. This follows a number of demonstrations in the territory in recent years in protest against increasing inequality and rising prices. In March the Chinese president, Hu Jintao, warned Mr Ho that he needed to deal properly with the "new situations" and "new problems" that Macau faces as its development proceeds.

Economic policy

Macau recorded a budget surplus of MPtc21.8bn (US$2.7bn) in 2007, compared with MPtc9.8bn surplus in 2006. The surplus rose owing to a 9.4% increase in budget revenue and a 31.1% fall in government spending. In a major new announcement, the government has said that it will not grant any new gaming concessions or sub-concessions nor approve any land for the building of new casinos in the near future. The move is aimed at reducing growing inequality, which is responsible for the recent rise in social unrest in the territory.

The domestic economy

Real GDP grew by an estimated 22.1% year on year in the fourth quarter of 2007, bringing growth for the year as a whole to 27.3%. The fourth quarter saw the slowest pace of growth during the year, mostly owing to a 11.9% fall in investment spending. The labour force has continued to grow to record levels. The size of the labour force crept up from 323,000 at the end of 2007 to 327,000 at the end of the first quarter of 2008. The unemployment rate remained steady at 2.9% at the end of the first quarter. Salaries have continued to lag behind overall economic growth. Macau now has one of the highest levels of GDP per head in Asia, but in the first quarter of 2008 the median monthly salary stood at just MPtc8,200 (US$1,025).

Foreign trade and payments

The value of total merchandise exports fell by 9% year on year in the first four months of 2008, to MPtc5.4bn. Meanwhile, imports rose by 10.8% in the period, to MPtc14.2bn, resulting in a trade deficit of MPtc8.8bn.