IMF sees “bright” future for Macau, urges diversification

The International Monetary Fund says the outlook for Macau is “bright,” with growth over the next few years likely to be about 8 to 10 percent, though it said the over reliance on gaming may make it vulnerable to external shocks.

Inflation is likely to run at about 5 to 5.5 percent, it said.

“While Macao SAR may benefit from further developing services demanded by a changing global environment, the narrow base of the economy makes it susceptible to external shocks, including a potential slowdown in tourism, due to shocks in the Mainland or Hong Kong SAR, or other setbacks to the global recovery,” the IMF said after completing its first consultation on the territory since the handover to China.

The IMF also suggested that Macau use some of its huge fiscal reserves, generated mainly by taxes from the gaming industry, to set up a Sovereign Wealth Fund.

Over the longer-term, the IMF said that growth may slow as the gaming sector matures and the population ages. This will make it even more important for Macau to diversify its economy.

“Directors underscored that economic diversification holds the key to unlocking additional growth engines and achieving greater economic resilience over the longer term,” the IMF said. The fund did commend the government’s efforts to promote non-gaming services, but encouraged them to explore further opportunities, such as broader integration with Mainland China.

Macau’s casino operators have been seeking to expand their range of offerings to appeal to a wider tourist base as the tourism demographic evolves.

 

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