{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation Discussions with People’s Republic of China—Macao Special Administrative Region",
  "publication": "IMF News, April 12, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/04/12/pr22116-imf-executive-board-concludes-article-iv-consultation-macao-special-administrative-region",
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  "summary": "Executive Board concluded the Article IV consultation with the People’s Republic of China—Macao Special Administrative Region (SAR) on March 29, 2022 and endorsed the staff appraisal on a lapse-of-time basis.",
  "publishDate": "2022-04-12",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Executive Board concluded the Article IV consultation with the People’s Republic of China—Macao Special Administrative Region (SAR) on March 29, 2022 and endorsed the staff appraisal on a lapse-of-time basis.\n- Macao SAR was \"hit hard by the COVID-19 crisis,\" and the government’s strong policy response \"helped stabilize employment and consumption, while preserving people’s health and safety.\"\n- The pandemic highlighted Macao SAR’s overreliance on the gaming industry and high exposure to climate-related disasters."
    },
    {
      "heading": "Economic performance and projections",
      "content": "- After a \"54 percent of GDP decline in 2020,\" the economy \"expanded by 18 percent in 2021\" supported by the partial recovery of the gaming sector.\n- Consumer prices were \"on average unchanged during 2021 relative to 2020.\"\n- Current account surplus in 2021 is estimated at \"less than half of its pre‑crisis level\" due to still relatively low tourism receipts.\n- GDP projections:\n  - 2022: \"15.5 percent\" growth driven by gradual return of foreign tourists and recovery of domestic demand.\n  - 2023: \"23 percent\" growth boosted by investment linked to issuance of new gaming concessions and further GBA integration.\n  - Medium term: gradual convergence to long‑term potential of \"around 3.5 percent.\"\n- Headline inflation projection: accelerate in 2022 and \"stabilize at around 2.5 percent over the medium term.\"\n- Timing to surpass pre‑crisis GDP level: \"only in 2025\" given depth of pandemic losses.\n- Table 1 selected annual percentage-change entries (2017–2027, Est/Projections):\n  - Real GDP: 2017 \"10.0\", 2018 \"6.5\", 2019 \"-2.5\", 2020 \"-54.0\", 2021 \"18.0\", 2022 \"15.5\", 2023 \"23.3\", 2024 \"18.6\", 2025 \"9.8\", 2026 \"5.1\", 2027 \"3.5\".\n  - Total domestic demand: 2017 \"-0.2\", 2018 \"-1.7\", 2019 \"-0.7\", 2020 \"-10.1\", 2021 \"3.0\", 2022 \"5.8\", 2023 \"3.3\", 2024 \"3.9\", 2025 \"4.0\", 2026 \"4.9\".\n  - Consumption: 2017 \"2.1\", 2018 \"4.1\", 2019 \"3.4\", 2020 \"-7.2\", 2021 \"4.6\", 2022 \"6.0\", 2023 \"2.5\", 2024 \"2.8\", 2025 \"2.9\", 2026 \"3.2\".\n  - Investment: 2017 \"-4.1\", 2018 \"-6.1\", 2019 \"-18.4\", 2020 \"-17.2\", 2021 \"-1.4\", 2022 \"5.3\", 2023 \"5.7\", 2024 \"8.0\", 2025 \"7.1\", 2026 \"9.2\".\n  - Net exports (contribution): 2017 \"6.2\", 2018 \"-0.5\", 2019 \"-49.0\", 2020 \"15.8\", 2021 \"20.7\", 2022 \"16.1\", 2023 \"7.6\", 2024 \"0.9\".\n  - Headline inflation (Average): 2017 \"1.2\", 2018 \"0.8\", 2019 \"0.0\", 2020 \"2.7\", 2021 \"2.6\".\n  - Nominal GDP (In millions of U.S. dollars): 2017 \"50,441\", 2018 \"55,285\", 2019 \"55,205\", 2020 \"25,586\", 2021 \"29,905\", 2022 \"35,246\", 2023 \"44,856\", 2024 \"54,847\", 2025 \"61,807\", 2026 \"66,446\", 2027 \"70,373\".\n  - Per capita GDP (In thousands of U.S. dollars): 2017 \"78\", 2018 \"83\", 2019 \"81\", 2020 \"37\", 2021 \"44\", 2022 \"51\", 2023 \"63\", 2024 \"76\", 2025 \"85\", 2026 \"90\", 2027 \"95\".\n  - Foreign exchange reserves (In billions of U.S. dollars): 2017 \"20.2\", 2018 \"20.3\", 2019 \"22.2\", 2020 \"26.7\".\n  - Gross external debt: 2017 \"174.0\", 2018 \"185.8\", 2019 \"223.4\", 2020 \"557.3\", 2021 \"569.4\", 2022 \"507.3\", 2023 \"418.6\", 2024 \"320.0\", 2025 \"305.0\", 2026 \"290.0\", 2027 \"275.0\".\n  - Current account (In percent of GDP): 2017 \"30.8\", 2018 \"33.0\", 2019 \"33.8\", 2020 \"15.2\", 2021 \"14.9\", 2022 \"22.4\", 2023 \"26.3\", 2024 \"27.1\", 2025 \"26.2\".\n  - Services contribution to current account (In percent of GDP): 2017 \"67.3\", 2018 \"69.0\", 2019 \"69.8\", 2020 \"32.4\", 2021 \"49.0\", 2022 \"53.2\", 2023 \"61.5\", 2024 \"65.8\", 2025 \"67.5\", 2026 \"66.3\"."
    },
    {
      "heading": "Risks and vulnerabilities",
      "content": "- Large downside risks cited:\n  - Resurgence of the COVID‑19 pandemic could stall near‑term recovery and undermine medium‑term viability of gaming sector.\n  - Uncertainty regarding proposed amendments to Macao’s gaming law and the ban on gaming services’ marketing in the Mainland cloud the gaming sector outlook.\n  - Potential large‑scale defaults in Mainland China’s real estate sector and a sudden growth slowdown in Mainland China pose risks to Macao SAR’s economy and financial system.\n  - Decline in households’ debt servicing capacity from pandemic income losses and pressures on non‑financial firms from tighter global financial conditions could negatively affect the banking system.\n  - Macao SAR’s high exposure to climate-related shocks poses long-term concerns.\n- External position assessment (staff preliminary): \"substantially stronger than warranted by medium term fundamentals and desirable policies.\"\n- Persistent saving-investment gap partly driven by high precautionary savings and subdued investments."
    },
    {
      "heading": "Policy recommendations and priorities",
      "content": "- Near-term policy mix:\n  - Implement a \"safe reopening of the economy\" supported by further increase in vaccination rates and establishing additional travel corridors.\n  - Adjust fiscal policy stance from \"contractionary to neutral\" and change composition to support inclusion and growth.\n  - Strengthen banks’ monitoring of borrowers (including from the Mainland) and encourage \"conservative provisioning.\"\n  - Enhance insolvency and debt resolution and restructuring frameworks, including use of \"special out‑of‑court solutions.\"\n  - Phase out the residency‑based LTV capital flow management measure and macroprudential measure.\n  - Maintain exchange rate regime success via countercyclical fiscal policy, flexible labor markets, a healthy banking sector, and adequate reserve coverage.\n- Structural reform priorities for diversification:\n  - Invest in skill building and infrastructure, including digital infrastructure.\n  - Enhance effectiveness of public institutions and improve business environment.\n  - Leverage integration with the Guangdong‑Hong Kong‑Macao Greater Bay Area (GBA) to access a larger pool of skilled labor and offshore economic activities.\n  - Balance financial sector development with preservation of financial stability and integrity by further strengthening regulatory and supervisory framework.\n  - Strengthen cooperation among government agencies responsible for the diversification agenda.\n- Climate-related policy recommendations:\n  - Strengthen climate adaptation measures and scale up public investments in key areas of climate related vulnerabilities.\n  - Enhance early warning systems to monitor and evaluate Macao SAR’s exposure to climate change risks.\n  - Improve understanding and management of financial risks due to climate change to shield the financial system.\n- Fiscal strategy recommendation:\n  - Adopt a well‑articulated medium term fiscal strategy to support diversification and climate resiliency efforts.\n  - Increase spending on education, healthcare, and climate resilient public infrastructure throughout the medium term.\n  - Establish a credible medium/long term fiscal framework to manage trade‑offs from multiple fiscal demands beyond the annual budget process.\n\nIMF Press Release No. 22/116 — April 12, 2022; IMF Communications Department\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- People's Republic of China - Macao Special Administrative Region and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/04/12/pr22116-imf-executive-board-concludes-article-iv-consultation-macao-special-administrative-region"
    }
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    "Published: April 12, 2022",
    "Executive Board concluded the Article IV consultation with the People’s Republic of China—Macao Special Administrative Region (SAR) on March 29, 2022 and endorsed the staff appraisal on a lapse-of-time basis.",
    "Macao SAR was \"hit hard by the COVID-19 crisis,\" and the government’s strong policy response \"helped stabilize employment and consumption, while preserving people’s health and safety.\"",
    "The pandemic highlighted Macao SAR’s overreliance on the gaming industry and high exposure to climate-related disasters.",
    "After a \"54 percent of GDP decline in 2020,\" the economy \"expanded by 18 percent in 2021\" supported by the partial recovery of the gaming sector.",
    "Consumer prices were \"on average unchanged during 2021 relative to 2020.\"",
    "Current account surplus in 2021 is estimated at \"less than half of its pre‑crisis level\" due to still relatively low tourism receipts.",
    "GDP projections:",
    "Headline inflation projection: accelerate in 2022 and \"stabilize at around 2.5 percent over the medium term.\"",
    "Timing to surpass pre‑crisis GDP level: \"only in 2025\" given depth of pandemic losses.",
    "Table 1 selected annual percentage-change entries (2017–2027, Est/Projections):",
    "Large downside risks cited:",
    "External position assessment (staff preliminary): \"substantially stronger than warranted by medium term fundamentals and desirable policies.\"",
    "Persistent saving-investment gap partly driven by high precautionary savings and subdued investments.",
    "Near-term policy mix:",
    "Structural reform priorities for diversification:",
    "Climate-related policy recommendations:",
    "Fiscal strategy recommendation:",
    "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)",
    "[People's Republic of China - Macao Special Administrative Region and the IMF](http://www.imf.org/external/country/MAC/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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