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Macau Country Risk Report Q1 2018

Macau Country Risk Report Q1 2018

With political tensions between neighbouring Hong Kong and mainlandChina simmering in 2017, we expect continued political stabilityin Macau over 2018. Relations between the Special AdministrativeRegion and mainland have remained strong in the last few yearsin spite of increased calls for democratisation in Hong Kong andwe expect to see further economic integration between Macau andChina help to encourage even stronger political ties.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
No Return To The VIP Bubble
Macau’s economy has bounced back strongly since the 2014-15 slowdown, with gaming revenues once again driving headline growth
in spite of weakness in the domestic economy. That said, we do not expect this trend to continue as economic diversification efforts
continue to bear fruit, while the VIP gaming sector faces multiple headwinds. We expect real GDP growth to slow to 5.0% in 2018, from
an estimated 9.0% in 2017.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: MAIN EXPORTS AND IMPORTS
TABLE: MAIN EXPORT AND IMPORT PARTNERS
Monetary Policy
Inflation Credibility To Remain Intact
We see little threat of a sharp rise in inflation over the coming decade as the monetary authorities have a strong track record of
maintaining price stability, and the huge stock of external assets will continue to provide confidence in the currency peg. The AMCM
has a statutory obligation to issue and redeem pataca on demand against the Hong Kong dollar at a fixed exchange rate and without
limit.
Fiscal Policy And Public Debt Outlook
Government Spending Set To Rise
Huge revenues from the casino industry have buttressed Macau's fiscal accounts in recent years, resulting in sustained large fiscal
surpluses. Over the coming years the government will increasingly rely on fiscal spending to support growth and diversify the economy,
which will result in a reduced fiscal deficit and a larger share of spending relative to GDP. Reduced growth in gaming revenues will put
additional pressure on the fiscal surplus.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Long-Term Economic Outlook
A New Era Of Low Growth And Diversification
Macau has enjoyed an unprecedented boom over the past decade leveraging off of the economic growth and easy liquidity conditions
seen in Mainland China, but this came to an end in 2015. Even as the government pushes ahead with its attempts to diversify away
from high-end gaming in an attempt to attract a wider visitor base, the heydays of 2010-2014 will not return.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 2: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Political Stability Intact Amid Deepening Ties With Mainland
With political tensions between neighbouring Hong Kong and mainland China simmering in 2017, we expect continued political stability
in Macau over the course of 2018. Relations between the Special Administrative Region and the mainland have remained strong in
recent years in spite of increased calls for democratisation in Hong Kong and we expect to see further economic integration between
Macau and China help encourage even stronger political ties.
Long-Term Political Outlook
Continued Stability Under The One Country, Two Systems Policy
We expect continued political stability in Macau over the next decade as Beijing increasingly asserts its control over the Special
Administrative Region (SAR). Growing political awareness among the Macanese people will pose a headache for Beijing as calls for
greater government accountability grow louder.
Chapter 3: Demographic Outlook
Demographic Outlook
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Chapter 4: BMI Global Macro Outlook
Growth, Inflation And Rates On The Rise
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: MACAU – MACROECONOMIC DATA & FORECASTS

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