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Macau Country Risk Report 20 2016

  • March 2016
  • -
  • Business Monitor International
  • -
  • 27 pages

Core Views Diversification will be the main theme of Macau’s economy over the coming years. Both Chinese President Xi Jinping and Macau Chief Executive Fernando Chui Sai On have stressed the importance of economic diversification in the gambling-dominated Special Administrative Region. A shift is currently underway to reduce the heavy dependence on gaming revenues, and increase leisure and tourism as a share of GDP. VIP baccarat revenues fell to 60% of total gambling receipts in the first three quarters of 2014, compared with 66% in 2013. Another theme will be the ongoing corruption clampdown in China, which will weigh on Macau’s gaming revenues.

As Xi Jinping continues to fight corruption, hot money flows from mainland China to Macau will be reduced further. Meanwhile, the anti-corruption drive is increasingly extending to Macau, with the recent bust of a largescale prostitution ring run by nephew of casino magnate Stanley Ho, is likely a sign of things to come. Labour shortages could increasingly become a problem for Macau’s casino operators as casino expansion continues amid an alreadytight labour market. Increasingly powerful labour unions mean that it is illegal to hire foreign workers as casino dealers, which is likely to result in higher labour costs over the coming years for the finite pool of native workers. Political stability is likely to remain even as calls for universal suffrage in neighbouring Hong Kong remain elevated. Beijing has been quick to crack down on opposition within Macau to the current ‘one country, two systems’ policy, and this is likely to prevent any meaningful rise in political unrest.

Table Of Contents

Macau Country Risk Report 20 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Domestic Demand To Rise In Importance8
Macau's economy is heavily export oriented, with exports equivalent to almost 100% of GDP As gaming revenues from overseas have
fallen over the past year, Macau's trade surplus has declined, and as a share of GDP this trend will continue as gaming revenues grow
at a much slower pace than over the boom years In turn, private consumption will rise as a share of GDP from its currently low level of
around 25%, with domestic demand increasingly becoming a more important driver of the economy
TABLE: GDP GROWTH FORECASTS8
TABLE: PRIVATE CONSUMPTION FORECASTS8
TABLE: GOVERNMENT CONSUMPTION FORECASTS8
TABLE: FIXED INVESTMENT FORECASTS9
TABLE: NET EXPORTS FORECASTS9
Monetary Policy 9
Inflation Credibility To Remain Intact 9
We see little threat of a sharp rise in inflation over the coming decade as the monetary authorities have a strong track record of
maintaining price stability, and the huge stock of external assets will continue to provide confidence in the currency peg Indeed, the
AMCM has a statutory obligation to issue and redeem pataca on demand against the Hong Kong dollar at a fixed exchange rate and
without limit
External Trade and Investment Outlook 10
Current Account Surplus To Narrow10
Macau's external accounts are in solid shape, with tourism inflows from mainland China resulting in huge current account surpluses and
a large net international investment position Slower growth in gaming revenues and greater domestic demand in line with higher fiscal
spending will see imports grow at a faster pace than exports, narrowing the current account surplus, but the large external asset base
should continue to grow
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE10
TABLE: MAIN EXPORTS AND IMPORTS10
TABLE: MAIN EXPORT AND IMPORT PARTNERS10
Fiscal Policy And Public Debt Outlook 11
Government Spending Set To Rise11
Huge revenues from the casino industry have buttressed Macau's fiscal accounts in recent years, resulting in sustained doubledigit
fiscal surpluses Over the coming years the government will increasingly rely on fiscal spending to support growth and diversify
the economy, which will result in a reduced fiscal deficit and a larger share of spending relative to GDP Reduced growth in gaming
revenues will put additional pressure on the fiscal surplus
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES11
Chapter 2: Political Outlook 13
SWOT Analysis 13
BMI Political Risk Index 13
Long-Term Political Outlook 14
Continued Stability Under The One Country, Two Systems Policy14
We expect continued political stability in Macau over the next decade as Beijing increasingly asserts its control over the Special
Administrative Region That said, growing political awareness among the Macanese people will pose a headache for Beijing as calls for
greater government accountability grow louder
Chapter 3: Operational Risk 17
Operational Risk Index 17
Chapter 4: Demographic Outlook 19
Demographic Outlook 2016 19
TABLE: POPULATION BY AGE GROUP20
TABLE: POPULATION BY AGE GROUP %20
TABLE: POPULATION HEADLINE INDICATORS21
TABLE: KEY POPULATION RATIOS21
TABLE: URBAN/RURAL POPULATION and LIFE EXPECTANCY21
Chapter 5: BMI Global Macro Outlook 23
Global Macro Outlook 23
Tail Risks Mounting Amid Sub-Par Growth23
TABLE: GLOBAL ASSUMPTIONS23
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %24
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%) 24
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %25
TABLE: MACROECONOMIC DATA and FORECASTS27

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