Daily Management Review

The Miracle of Macao: GDP Fell by 26%? Alright!


09/04/2015


The unemployment rate is 25%, the national debt of 170% of GDP, industrial production fell by 26% and the extremely unstable political situation have been extremely traumatic for Greece and the Greeks. But Macao is not worried about the prospects being in a similar economic situation.



Recently, the government of Macao (former Portuguese colony, and today an autonomous territory within China and one of the informal gambling capitals of the world) has published its macroeconomic statistics, according to which the gross domestic product in the II quarter fell by 26.4% compared with the same period last year.

Yet, apparently, the real economy Macau feels good. Despite the sharp fall in GDP, unemployment rate remained at the level of full employment by 1.8%, consumer spending rose and the territorial Government had a budget surplus.

Can we ever say that the economy of Macao is walking on the edge of the abyss?

It turns out that not all GDP are the same. The city of Macao (per capita GDP was $ 89 thousand in 2014) is obliged for its well-being to casinos, which account for almost half of its total output.

Every year the city attracts about 23 million tourists.

Anti-Corruption Campaign of the Chinese government has led to a collapse in revenue in the gambling business by 40% and 21.5% in other tourist sectors.

Due to the fact that gambling and tourism industry accounts for a significant share of the economy, their sharp slowdown instantly reflected in the GDP of the autonomous territory, says the British magazine The Economist.

But so far, the negative effect was seen only in the accounts of Macao casino owners outside the city. Mostly, fell profits of gambling tycoons of Las Vegas and Hong Kong, who run almost all the gaming rooms in Macao.

The most important thing for 663 thousand residents is that the local labor market is still stable. Numerous casinos, despite financial difficulties, do not dismiss their employees.

Moreover, investment in other activities are increasing: the problems of the gambling halls make the casino management try something new and engage in diversification.

For example, giant Ferris wheel, and a replica of the Eiffel Tower are currently being under construction.

However, if diversification cannot increase the number of tourists, and China will continue its anti-corruption campaign, Macao residents eventually will feel the slowdown in business.

The first signs of this are already visible. Staying in the black, the budget surplus of the government of Macao, however, fell to the lowest since 2011; consumer spending increased by 2% compared to last year. This is the worst performance in nearly six years.

Macao’s casino certainly has fallen on hard times. Soon, luck can also leave ordinary people of the only city in China where gambling is allowed.

source: economist.com






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