Country Report Macau March 2009

Outlook for 2009-10

Despite Macau's new-found prosperity, political discontent is rising. The second and final term of Macau's chief executive, Edmund Ho, expires in 2009. At the moment it is not clear who the leading contenders are to replace him or, more importantly, who is mainland China's favoured candidate. Economic policy will focus on the smooth progress of gambling sector liberalisation. There will also be growing pressure for the government to increase spending to cushion the impact of the economic downturn. Real GDP will contract in 2009, owing to falling casino revenue and the collapse of investment in new casino operations. The economy may be helped if the Chinese government decides to abandon its policy of restricting Chinese visitors to Macau.

The political scene

On February 25th Macau enacted anti-subversion legislation outlawing acts of treason, secession or subversion against the Chinese government. Following the election of a new chief executive this summer, Macau will hold elections for its Legislative Assembly in September. The assembly will remain loyal to the Chinese government.

Economic policy

Despite the need for major new investment in public infrastructure, capital spending has remained weak. The government has continued to run huge budget surpluses, owing to booming casino revenue until recently. No new measures have been announced to support the economy amid a deep global economic downturn, which has now started to have a severe impact on Macau.

The domestic economy

Real economic growth is slowing rapidly in Macau. In the third quarter of 2008 real GDP grew by just 11.3% year on year, down from 32.3% in the first quarter. The main reasons for the slowdown in growth are contracting investment spending and weaker services exports, amid a large fall in tourist arrival numbers. Retail sales growth is also slowing: in the final quarter of 2008 retail sales grew by 20.7% year on year, down from 40% in the second quarter. Employment of non-resident workers has fallen sharply, owing to the collapse in casino construction investment; Las Vegas Sands of the US alone dismissed 9,000 non-resident construction workers in November.

Foreign trade and payments

The value of total merchandise exports (in pataca terms) plunged by 42.4% year on year in the fourth quarter of 2008, with the result that exports contracted by 21.6% in 2008 as a whole. Last year there was a fall in exports to all of Macau's main trading partners apart from Hong Kong.

This report covers the following industry codes:
SIC Code: 70;60;1;65
NAICS Code: 72;52;11;53