Country Report Macau September 2009

Outlook for 2009-10

Addressing rising discontent will be one of the main challenges facing Fernando Chui, who was elected as Macau's chief executive on July 26th but who will not take office until December. His other challenges are to combat rising corruption and introduce measures to support the struggling economy. Real GDP is forecast to contract sharply in 2009, amid falling visitor numbers and a slump in new casino investment. The government, which has a healthy fiscal 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 mainland visitors to Macau.

The political scene

Mr Chui is to replace Edmund Ho as chief executive. Before his election to this post, Mr Chui worked in the cabinet as secretary for social affairs and culture in 1999. Mr Chui has pledged to diversify the economy and reduce its current over-reliance on the gambling sector and to rid the territory of corruption. He made no mention of taking Macau towards greater democracy, and instead stressed the need to build greater social harmony.

Economic policy

Total government revenue fell by 0.3% year on year in the first half of 2009 to MPtc25.5bn (US$3.2bn), with revenue from gambling taxes down by 10.4% to MPtc19.6bn. The government is considering proposals to lift the minimum age for employment at a casino from 18 years to 21 years. Raising the minimum casino employment age would put upward pressure on salaries, and would probably encounter resistance from the casino industry.

The domestic economy

Macau's growth prospects have fallen sharply over the past year, owing to the deteriorating outlook for the global economy. Despite strong growth of 13.2% in 2008, real GDP fell by 12.9% year on year in the first quarter of 2009, on the back of a slump in investment and service exports. The slide in the economy has caused unemployment to rise, although even by the first quarter of 2009 the unemployment rate was still a relatively low 3.8%. The economic slowdown has caused inflation to fall sharply in recent months, with the year-on-year rate falling to just 1.8% in the second quarter of 2009.

Foreign trade and payments

The value of total exports plunged by 54% year on year to MPtc3.9bn in the first half of 2009, following a 21.6% drop in 2008. In the first half of 2009, 35.3% of Macau's exports by value were shipped to Hong Kong.

This report covers the following industry codes:
SIC Code: 53;10;49;70
NAICS Code: 44;212;22;72