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Unemployment to rise to 2.7%, salaries increase: Macau GDP growth to slow to 18% in 2012
Due to the global economic downturn and lingering financial crisis in major economies across the world, the Macau economy is not expected to maintain its “abnormally” fast expansion, according to economists from the University of Macau. Local GDP is expected to increase by 18 percent this year, 2.7 percent lower than in 2011, and will decline a further 14.4 percent in 2013. Unemployment rates are expected to climb to 2.5 percent and 2.7 percent in 2012 and 2013 respectively, but the impact on gaming industry is expected to be slim.
Analysis by the university on the macro-econometric model for the city predicts that “Macau is facing great uncertainty in 2012”. “According to the International Monetary Fund forecasts, global growth will moderate to about 3.3 percent through 2012,” UM said, “US GDP is expected to expand by 1.8 percent and the Euro Area is likely to contract 0.5 percent. For Mainland China, the GDP growth rate has slowed down to 8.1 percent in the first quarter of 2012, compared with the double-digit growth in 2010… The central government targeted 2012’s annual growth to an eight-year low of 7.5 percent.”
“The GDP growth rate of 20.7 percent in Macau (in 2011) is simply unimaginable if you compare it with the major economic entities in the world. That kind of figure is simply unsustainable and abnormal (…) In the US, a 2 or 3 percent growth will make Obama very happy; and in China they are only targeting a 7.5 percent growth this year.” - Kwan Fung, head of Department of Economics (UM)
As an economic entity prone to external economic fluctuations, Macau will soon feel the pinch, with visible effects emerging as early as in the fourth quarter of this year when a GDP hike is expected to show rollbacks. “This [global economic uncertainty] will affect Hong Kong, another major market of Macau’s service exports. (…) Under these circumstances, Macau’s GDP is expected to grow by 18 percent, with a range from a pessimistic 11.5 percent to an optimistic 24.5 percent in 2012 [see table].” 2013 GDP growth will further decline to 14.4 percent.
Services exports (including the gaming sector) will see a slower rise in 2012: 26.7 percent, in comparison to 29.4 percent last year. For 2013, the projection is 22.1 percent. As a result, the growth rate of salaries will decrease and unemployment is expected to increase. Median monthly earning growth is expected to drop to 8.4 percent in 2012, or two percentage points lower than that in 2011; and to drop another 0.1 percentage point in 2013. The unemployment rate, on the other hand, is tipped to remain at 2.5 percent this year, however will climb 0.2 percent (to 2.7 percent) in 2013.
The good news is that CPI, or inflation, is expected to slow, alongside the growth in the GDP and unemployment rate. A 5.5 percent hike is forecasted for 2012, 0.1 percent lower than in 2011, expected to experience another significant drop in 2013 (by 0.4 percentage point to 5.1 percent).
Speaking on the concerning drop in the GDP rate, UM economists played down the practical impacts on the whole economy and the everyday lives of the general public. “In the US, a 2 or 3 percent growth [rate] would make Obama [US president] very happy, and in China they are only targeting a 7.5 percent growth this year,” said Professor Kwan Fung, head of the department of Economics. “The GDP growth rate of 20.7 percent in Macau (in 2011) is simply unimaginable if you compare it with the major economic entities in the world. That kind of figure is simply unsustainable and is abnormal.”
Forecast of major economic variables
“Even if the figure slows to 18 percent and then 14.4 percent, it’s still an admirably high number. As to the unemployment rate, the forecasts of 2.5 percent in 2012 and 2.7 percent in 2013 are still at an extraordinarily low level,” said another economist from the same department, Chan Chi Shing. An unemployment rate below 3 percent is generally regarded as (virtual) full employment. The unemployment rate in the Eurozone has risen to over 10 percent in March, and as high as around 20 percent in some European countries.
Almost no effects on gaming industry
Asked if the impact of slowing economic growth would affect the gaming industry, economists responded that it would have a very slim influence on the industry (if it has any impact at all), given the recent announcements by gaming operators for new large-scale investment projects in Macau.
“It shows they’re still confident and optimistic of economic prospects,” Kwan said, though he added that it would be a different scenario if any unexpected twists arise - especially in Mainland China - that might bring about a significant drop of Chinese tourists to Macau.
Asked of the possible overspill from US and EU slowdown, the economists said any possible impacts would be “less serious” than the “Mainland Chinese factor”, but a sharp decline of US and European tourists is undesirable for Macau whilst the former colony seeks to broaden its source of visitors and alleviate its reliance on Chinese tourists.
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