IMF Executive Board Concludes 2019 Article IV Consultation with People’s Republic of China—Macao Special Administrative Region

IMF News, May 9, 2019

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IMF Executive Board Concludes 2019 Article IV Consultation with People’s Republic of China—Macao Special Administrative Region

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• Published: May 9, 2019

Recent Developments and Outlook

• Macao SAR is the largest casino center in the world; gaming tourism drives its growth.
• Macao SAR has accumulated large fiscal and foreign reserve assets—standing at 121 and 40 percent of GDP respectively in 2017—with zero public debt.
• Economic performance:
  • Growth recorded 4.7 percent in 2018 (from 9.7 percent in 2017).
  • Inflation picked up over 2018 driven by housing, food, and energy prices.
  • Credit continued to expand over 2018; lending interest rate slightly increased.
  • Property prices recovered with the economic rebound, but were flat in the second half of 2018.
  • Unemployment remains low.
• Outlook:
  • Growth is projected at 4.3 percent in 2019 and to remain solid over the medium term at about 4 percent.
  • Main driver of projected medium-term growth is tourism, with non-VIP tourism further expanding and more subdued VIP gaming growth.

Executive Board Assessment

• Directors commended Macao SAR’s macroeconomic performance, resulting in one of the highest per capita incomes in the world with zero public debt levels.
• Directors noted that prudent macroeconomic policies and high reserves provide strong buffers against shocks, but growth risks are tilted to the downside.
• Fiscal policy and framework:
  • Need for a comprehensive reform agenda to support fiscal policymaking.
  • Acknowledgement that the current balanced budget rule has been instrumental in maintaining prudent fiscal policy.
  • Merit seen in an integrated medium/long‑term fiscal framework that could include countercyclical fiscal policy.
  • Support for the planned Macao Investment and Development Fund (MIDF) that is managed and governed under international standards.
  • Such a framework would help increase efficiency in the use of fiscal reserves, ensure priority spending supports diversification and inclusion, and help ensure long‑term fiscal sustainability and intergenerational equity in an aging society.
• Financial sector:
  • Financial sector remains sound with healthy liquidity and asset quality.
  • Welcomed steps to strengthen supervision and regulatory cooperation across jurisdictions.
  • Given the large size of the financial sector and significant short‑term foreign liabilities, Directors called for continued supervisory caution, including for sound Fintech adoption.
  • Welcomed the strengthening of the AML/CFT framework and called for sustained efforts, particularly for the gaming sector.
• Housing and macroprudential stance:
  • Current housing macroprudential stance and related fiscal measures appear broadly appropriate.
  • Systemic risks in the housing market seem broadly contained.
  • Housing affordability concerns should be addressed by a broad set of housing supply policies.
• Diversification and structural policies:
  • Diversification policies should be guided by a careful study of Macao SAR’s comparative advantage.
  • Commended progress and agreed with principle of diversification towards mass‑gaming and non‑gaming tourism and bolstering financial sector development.
  • Importance of supportive policies, including advancing infrastructure plans to ease supply‑side bottlenecks and fostering a highly educated workforce.
• Exchange rate and external position:
  • Exchange rate peg has provided monetary stability, continues to serve Macao SAR well and should be maintained.
  • Directors took note of staff’s assessment that Macao SAR’s external position is substantially stronger than implied by medium‑term fundamentals.

Selected Economic and Financial Indicators (highlights)

• Real GDP (annual percentage change):
  • 2016: -0.9
  • 2017: 9.7
  • 2018: 4.7
  • 2019 Est.: 4.3
  • 2020 Proj.: 4.2
  • 2021 Proj.: 4.1
• Gross fixed capital formation (in percent of GDP):
  • 2018: 12.8
  • 2019 Est.: 12.0
  • 2020 Proj.: 11.6
• National savings (in percent of GDP):
  • 2016: 48.7
  • 2017: 51.9
  • 2018: 50.8
  • 2019 Est.: 51.2
  • 2020 Proj.: 51.7
  • 2021 Proj.: 52.0
  • 2022 Proj.: 52.4
  • 2023 Proj.: 53.1
• Fiscal and reserve indicators (in percent of GDP unless otherwise specified):
  • Fiscal Reserve trajectory (selected entries): 95.3; 121.1; 120.8; 115.6; 123.4; 130.8; 136.8; 141.8; 146.2; 149.7
  • General government balance (in percent of GDP): 2016: 11.4; 2017: 14.2; 2018: 13.8; 2019 Est.: 12.9
  • Budgetary Central Government Balance (in percent of GDP): 2016: 6.3; 2017: 10.6; 2018: 12.6; 2019 Est.: 12.2; 2020 Proj.: 11.7; 2021 Proj.: 11.3
  • Revenue (in percent of GDP): 2010: 34.8; 2011: 38.3; 2012: 37.6; 2013: 36.6; 2014: 35.2; 2015: 30.1; 2016: 28.0; 2017: 29.1; 2018: 29.7; 2019 Est.: 29.3; 2020 Proj.: 29.0; 2021 Proj.: 28.6; 2022 Proj.: 28.3; 2023 Proj.: 27.9
  • Expenditure (in percent of GDP): 2010: 16.1; 2011: 15.6; 2012: 13.1; 2013: 14.6; 2014: 21.4; 2015: 18.5; 2016: 17.6; 2017: 17.1; 2018: 17.2; 2019 Est.: 17.3; 2020 Proj.: 17.4; 2021 Proj.: 17.5
• Balance of payments (current account, selected years, in percent of GDP):
  • 2010: 39.4
  • 2011: 40.9
  • 2016: 33.0
  • 2017: 35.0
  • 2018: 37.4
  • 2019 Est.: 38.7
  • 2020 Proj.: 39.5
  • 2021 Proj.: 41.7
• Foreign exchange reserves (in billion of US dollars):
  • Selected series: 23.7; 34.0; 16.6; 18.9; 20.2; 20.3
• Nominal GDP (in millions of US dollars), selected years:
  • 2010: 28,123.7
  • 2011: 36,708.0
  • 2012: 43,031.8
  • 2013: 51,552.4
  • 2014: 55,348
  • 2015: 45,362
  • 2016: 45,322
  • 2017: 50,559
  • 2018: 54,545
  • 2019 Est.: 58,055
  • 2020 Proj.: 62,158
  • 2021 Proj.: 66,673
  • 2022 Proj.: 71,689
  • 2023 Proj.: 77,086
  • 2024 Proj.: 82,990
• Per capita GDP (in thousands of US dollars), selected years:
  • 2010: 52
  • 2011: 67
  • 2012: 76
  • 2013: 87
  • 2014: 89
  • 2015: 71
  • 2016: 70
  • 2017: 78
  • 2018: 83
  • 2019 Est.: 86
  • 2020 Proj.: 91
  • 2021 Proj.: 96
  • 2022 Proj.: 102
  • 2023 Proj.: 108
  • 2024 Proj.: 115

Source: Press Release No. 19/153, May 9, 2019 — IMF Communications Department.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• People's Republic of China and the IMF
• People's Republic of China - Macao Special Administrative Region and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.imf.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home