A decade spent rolling in riches can certainly change perspectives, as was evidenced last weekend when the government announced a possible cut in spending due to the recent gaming slump.
Secretary of the Economy and Finance, Lionel Leong Vai Tac, said it would be necessary for the government to implement austerity measures if July gaming revenue falls below MOP18.35 billion as expected.
“Austerity measures” … really? Let’s compare Macau to another country currently implementing austerity measures – Greece. The Greeks are in the midst of a major economic meltdown with debts totaling around US$350 billion and a financial system perilously close to complete collapse. Now let’s look at Macau, which is also in a perilous situation according to all reports with gaming revenue down by almost 40 percent from its peak of 18 months ago. The flow-on effect of this is that government tax revenue from gaming is also down by around 35 percent – a considerable hit given the gaming industry accounts for around 80 percent of Macau’s economy.
Yet while Greece finds itself drowning in debt, the result of Macau’s decline was a US$3.16 billion surplus in the first six months of 2015. A surplus! You can literally count the nations to have banked more on one hand – not bad for a place recently named the world’s worst performing economy!
Macau’s GDP fell by 25 percent in the first quarter of this year to draw immediate comparisons with the Greek predicament but in fact this shouldn’t be seen so much as a reflection of Macau’s decline but the explosive growth that preceded it. Incredibly, between 1999 when Macau was returned to China and early 2014 when the economy peaked, GDP grew by an astonishing 750 percent! Not even the most optimistic of observers saw that one coming. In fact such have been the riches in the Macau government’s coffers that year after year the government has failed to meet its spending targets.
Of course, this is not to dismiss the seriousness of the current decline. A shrinking economy always comes with ramifications. But all this talk of austerity measures only adds weight to our suspicion that many in Macau were left dizzied by the sheer speed and scale of its rise.
As it stands, the government’s fiscal reserves are around US$45 billion. And even with a dramatic drop in revenue combined with an increase in expenditure, those reserves are growing.
Perhaps now would be a good time for us all to regain that perspective.
