José I. Duarte

Economist, Macau Business Senior Analyst

The debate about the impact of mass tourism is going on in several places around the world. In some, it is very visible and, one might say, vociferous. It is (or will be) possibly everlasting. Tourism impacts local populations’ livelihoods and environment in multiple ways, some more amenable than others. Specific local issues will play out differently in different places, and diverse solutions will be tried – but the core issue is essentially the same. Too many people, either physically or psychologically, probably both, affect conspicuously how the locals go about their daily lives.

Setting such discussions around concepts such as carrying capacities and quotas is almost intuitive and provides a first easily understandable frame of reference. But, as argued here before, the simplicity of the approach may turn out to be too crude to lead to effective policies. It may be a starting point, but hardly an anchor for effective policies.

So, it all starts with increasing numbers of visitors. However, all the visitors are not the same, either in their contribution to the residents’ income or occupation of the physical space. (A short note is justified at this point before we proceed. Published statistics focus on the number of visitors, their length of stay, and their spending profiles. Other relevant matters, relating to their space and time distribution and concentration while in town require systematic information collection that is not readily available, if at all.)

The main distinction, between tourists (those staying overnight, as they are technically defined) and same-day visitors (self-explanatory) provides a good starting point for the discussion. They are associated with different spending profiles – and those differences matter. They impact local activities in diverse (positive and negative) ways.

Available data tell us that the average overnighter spends, gambling aside, four to five times more than same-day visitors. Indeed, part of that difference is directly linked to the fact that overnighters usually pay for lodging, a significant item in their expenditure basket. But even if we set aside that item (important as it is for the local economy’s direct and indirect income and employment), overnighters still typically spend at least twice as much as their single-day counterparts.

Indeed, the bulk of visitors come from mainland China and the overall figures in all types of expenditure are heavily influenced by their spending patterns. But, again, averages hide significant behavioural differences. Unsurprisingly, most visitors come from Guangdong and Fujian provinces, for reasons of geographical proximity and social affinity. The average consumption for all Chinese visitors is, therefore, quite close to the corresponding figures for those two regions. Yet, significant differences are visible, even at this high level of data aggregation.

For instance, visitors on individual visas consistently spend above the global average (by very variable margins, we may note, the reasons for which would be interesting to investigate). That difference seems related to the behaviour of visitors from regions other than the two closest ones seen above. Distance and visit frequency may play a role in them, but we can only guess, at this point – the data is too aggregated for further judgment).  

Indeed, all this conversation needs to go beyond the cold analysis of figures and the things they can (fruitfully) tell us. Yet, a careful examination of patterns, trends, and their evolution, is a needed starting point. It will help us to understand the flow of visitors, their distribution, and their spending profiles – and identify their drivers. It should inform any policies concerning the management of the city as a tourist destination, as well as its promotion.

José I. Duarte

Economist, Macau Business Senior Analyst

As the economy recovers, one hears renewed complaints about tourism overcrowding. Nobody indeed longs for COVID or any similar experience. Still, one cannot fail to recognise that many felt the aftermath of the pandemic gave the city back to the locals for a period. For many residents, the rising tide of tourism flows has brought back concerns about livability and well-being as areas of the city become visibly overcrowded and transit congestion intensifies. 

Consequently, demands for some sort of limitation on the number of visitors returned to the public agenda. The issue is not new, and neither is the main remedy suggested. Maybe it is time we had a fuller discussion about these issues, one from which a policy can be drawn that addresses those legitimate concerns without undue or avoidable costs that will also affect the citizens’ welfare. 

Macau has a population approaching 600,000 people while receiving more than three million monthly visitors at times. The stress on the urban space and infrastructure, not to mention the daily routines of residents, is undeniable and, at times, painful. 

So, the problem is real, but a solution, if there is one, must ponder and balance the various aspects and interests at stake, upholding tourism’s benefits while lessening the inconveniences locals and visitors feel. Other cities worldwide are grappling with similar problems and discussing or trying ways of dealing with them. 

Setting a maximum number of visitors has been proposed at times, and it seems like a simple and intuitive approach. Yet, it risks being rather crude as a measure and may entail needless side effects. Not all visitors are alike; not all pose the same challenges and impose the same costs. Simple solutions based on single quotas are unlikely to provide the necessary answers. 

Using the readily available figures published by the government, we can distinguish two broad types of visitors: same-day and overnight. Even at such a general level of distinction, it is clear they contribute in very different ways to the local economy and impose very different levels of stress on the urban and social fabric. Any policy bent on limiting visitors’ impact must start by clearly distinguishing these situations and their predictable implications. They are likely to call for different approaches and incentives if they are to deliver the desired results and lessen undesired effects. 

On average, same-day visitors stay in Macau for less than five hours. During those limited periods, they concentrate mainly on a very limited area of the city and impose the severest constraints on vehicle and person circulation. Their presence and expenses are indeed meaningful for a limited but not trivial number of local businesses. Overall, however, they represent comparatively little in terms of income and a lot in terms of congestion.

In recent years, overnight visitors spent significantly more — at least five times more per capita. They spend on a broader spectrum of activities and businesses, distribute themselves more evenly in space and time, and bear much less pressure on the city and its residents’ lives. 

Different types of visitors produce diverse impacts that justify diverse measures. A one-size-fits-all tool will be too blunt. Any policy setting visitors’ quotas (or alternative measures with similar purpose) should start by acknowledging and clearly distinguishing those situations and dealing with them differently. 

We should go further. That is a very general classification; careful and detailed profiling of the visitors to Macau, beyond these two categories, should be a necessary antecedent to any tourism management policy – a “know thy customer’ of sorts, allowing for a calibrated intervention, if or when it is required.

José I. Duarte

Economist, Macau Business Senior Analyst

China’s National Development and Reform Commission (NDRC) recently (at the end of 2023) published a significant document concerning the development of Hengqin Island. To my knowledge, the document “Hengqin Guangdong-Macau In-Depth Cooperation Zone General Development Plan” is only available in Chinese. 

Hopefully, an official translation will be made available in other languages, as it is of obvious relevance to the many residents in the region who do not master written Chinese, not to mention international businesses that may be interested in the region’s development plans. That issue aside, let us focus on the document’s contents, especially some of the targets (or forecasts?) set therein.

As it is well known, Hengqin Island is one of the critical areas for the development of the designated Greater Bay Area (GBA) and a central element in the policy orientations and actions relating to Macau’s future development. That document quantifies some important targets concerning the number of Macau residents expected to settle or work in Hengqin in the next decade, the subject we will focus on here. 

The population and workforce targets follow a broad calendar that would bring the total number of Macau residents living in Hengqin to 120,000 and the number of workers to 80,000 by 2035. Bearing in mind the average size of families in Macau and the activity rates prevailing in the region, these numbers also imply significant flows of workers shuttling between Macau and Hengqin. However, the basis or rationale for these numbers is not set forward, limiting our ability to comment on their foundations.

Note, however, that in 2022, those two figures stood at 1,300 and 5,400 persons, respectively. In the current year, their numbers should reach five and nine thousand. The figures entail an increase of roughly 6,800 workers and 10,000 residents per year, on average, until 2035. 

The report provides some intermediate targets for 2024 and 2029, chosen for their symbolic nature, as they corresponded to the 25th and 30th anniversary of the Macau SAR. They fit broadly with the average figures indicated above, which suggest an expectation of steady and regular growth in the coming years. 

Let us remove the non-residents from the local population and labour market figures, as they raise separate issues and are indeed not the ‘target’ population expected to move to Hengqin. Then, the people expected to live and work in Hengqin represent no less than 20 percent of the current local population and 25 percent of the corresponding labour force.  Should we consider the growth trends and the age structure of the population and the labour force, the percentages indicated could be even higher.

These numbers are bound to affect Macau’s demography and labour force, if not its social and economic fabric, more generally. This side of the regional development equation has been seldom tackled. 

Notwithstanding the income that the Hengqin island activities may provide to the residents or part of them, such flows are likely to strongly impact most other sectors of activity, namely those that depend mostly on the expenditures of the locals. 

For example, several local small retail businesses (including restaurants and providers of leisure and personal services) are already under stress from the competition brought by external suppliers and the ease with which locals may shop and spend their leisure time across the border. They may find themselves under increased pressure. Also, the housing market will inevitably be affected, as the emigration to Hengqin, in the numbers foreseen, will affect over 40,000 housing units. Even the public purse will not be immune to the tide. 

These issues alone suggest it is probably time to take a broader view of this process in all its dimensions and likely ramifications.

José I. Duarte

Economist, Macau Business Senior Analyst

Few words were possibly more often uttered about the Macau economy in the last four decades than “Diversification.” What were the Cotai area development plans’ aims if not providing additional space for the city’s perceived needs in population growth and its desired economic diversification? Who still remembers that railways were once planned next to the airport and the Ka Ho port?

Reality is often mischievous. Since then, the city’s dependence on its gambling sector has only increased. The allure of the opportunities opened by the end of the sector’s monopoly was difficult to resist, an attractiveness only amplified by the death foretold of the textile industry in the first decade of this century. How convenient was the wheel of fortune (no pun intended) adding almost five hectares to the region’s (crowded) landmass while Coloane was still untouchable?

Fast forward, and the city has, at last, a much-awaited plan for its economic diversification. That helps clarify what we are talking about. Diversification is a broad concept, indeed. Desirable in principle but difficult to define precisely, let alone quantify or measure. Without surprise, the aim of diversification is usually stated in public documents with qualifiers: “adequate” in Portuguese or “moderate” in English.

The Statistical services in the region recognize that difficulty. Their “Analysis Report of Statistical Indicator System for Moderate Economic Diversification of Macao” – published annually since 2015 – includes a wide array of indicators to monitor that feature’s evolution. It is an acknowledgment of the complexity of the concept and a sure indication that its scope or limits are not easily grasped or measurable. Further, when the indicators are numerous and, in some cases, strongly correlated, how do you sum up or balance changes that may appear contradictory?

That difficulty is also present in the diversification plan for the period 2024-2028, published in late 2023. Yet it seems to sidestep that issue somewhat, bringing to the top a straightforward indicator – the economic share of non-gambling economic activities. It should rise by 2028 to “about 60 percent” of the economy – that is, the gambling sector’s weight should hang at around 40 percent. If we leave the atypical COVID era aside, that target implies a decrease in the sector’s share of total GAV by about ten percentage points within five years compared to 2019. It does not seem unreasonably challenging, barring big exogenous surprises.

As a quotient, that indicator depends as much on what happens in the numerator (gambling GAV) as in the denominator (region’s GAV). The boundaries and structure of the sector, including its satellite activities, may also be affected by changes or adjustments in terms of classification, but let us leave that issue aside here.

Of course, a sharp decrease in the denominator should not cause the indicator’s positive evolution, as happened during COVID, when the quotient suffered a much more substantial hit as gambling revenue plummeted. That would be an impoverishing evolution, which we assume no one is looking for – much less the administration, whose finances would be severely hit.

So, over time, other economic activities that are not correlated to the dynamics of gambling should increase their weight and provide a rising share of the region’s income. Gambling’s share (and size?) would then decrease, according to expectations, without reducing the region’s welfare. As argued above, that path, in the simple terms stated, seems within reach – but will come with a caveat. It is usually accepted that when an indicator becomes a policy target, it will often cease to be a good indicator. Prudence in future analysis will, therefore, be warranted.

By José I. Duarte | Economist, Macau Business Senior Analyst

Current plans for developing Hengqin Island include the expectation of significant population inflows from Macau. To be more precise, as the media reported, by 2035, some eighty thousand Macau residents could be working there, and 120,000 would be residing on the island.

For a more consequential analysis, these figures’ precise context or foundation still needs to be clearly ascertained. At any rate, however, these are not trivial figures, and population movements of such magnitude will inevitably have significant economic and social impacts.

To say that demographics is destiny could push the argument too far. Yet, to say that demographic matters are often somewhat lost in economic growth and development discussions is probably as true a statement as one can be. Demography is the most overlooked of the social sciences. It is frequently ignored or brushed aside by more immediate considerations in debates on economic policies – or public policies, in general.

There are reasons for that, and we can understand them. Demographic impacts build up along extended time frames. Some of the current implications of demographic trends are the outcome of events and choices that occurred long ago. Similarly, the effects of decisions and behavioral changes happening now will only be felt several years, if not generations, down the line.

But no one in the world will reasonably deny the profound impact of demographic trends. Had Macau residents decided to have (many) more children in the 1980s and 1990s, the history of the economic boom of the last couple of decades and its labor market dynamics would have been necessarily different. Migratory flows would have had different composition and extension. Some of the topics on political agenda in the previous years would have been, at least, differently framed.

The most challenging time travel stories can provide phantasy-daring narratives and intellectually stimulating paradoxes. Once carved in the stone of time, demographic events cannot be changed or their effects avoided – and they require our attention.

The figures we are dealing with here are significant and raise inevitable questions about their possible impact on Macau as we know it. A substantial share of the growth of the Macau labor force has been associated with migratory inflows, most often with a non-resident worker status. These are certainly not meant to underpin Hengqin population growth. So, the above numbers must spring from the permanent residents’ stock.

The local population is aging due to longer lives and relatively low fertility rates. Fertility rates at the beginning of the century preclude many ‘fresh’ arrivals to the labor market in the coming years. Local unemployment is low, and underemployment rates are also returning to low pre-Covid levels.

The eighty thousand workers expected to have a job there within roughly one decade, amounting to one-third of all the locals employed full-time at the end of last year. It is more than all the people currently engaged in the gambling industry and on a level comparable to the highest level of employment ever attained by that economic activity sector.

Similarly, the future residents’ figure indicated would imply the displacement of one-fifth of the population in the same period. That raises questions about the impacts on other sectors – retail and restaurants being among the most evident – not to mention the effects on the provision of public services and facilities or the public finances.

We live surrounded by numbers and statistics. Familiarity and repetition may desensitize us to their meaning and implications, especially for something so remote from our daily concerns as demographic trends. But they have consequences we would be justified to ponder prudently.

Macau Business | June 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

The first GDP data of the year confirms what we might expect. Removing the COVID-related barriers allowed the economy to pick up again. At last, the recovery is underway.

The first quarter figures indicate a real homologous growth of about 40 percent. The coming months are likely to provide similarly high numbers. The year 2022 was a terrible one, even worse than 2021. We are starting from a low base; growth percentages will inevitably be high. But we are well below the previous norm, and it will take time to recover the losses of the last three years.

Further, as the economy opens, we will likely benefit from what one might call ‘repressed’ demand. The visitors’ willingness to come to Macau and spend existed but was blunted. The initial stages of the recovery will benefit from an increased impetus, which may decrease over time.

The top questions everybody will be asking anew are how fast the recovery will proceed and how far it will go. To use the cliché of the times (forgive me), what will be the “new normal, and how long will it take to get there?

To attempt to answer the uncertainties about the extent and pace of the recovery, two indicators top the dashboard of observers: the number of visitors and the gambling revenue (nothing new). Both flows of people and money raise interrogations. They are certainly related, but that relationship is weaker and more complex than it is often made.

The answers lie more in what is happening or will be happening beyond the Macau borders, where most of the demand dwells, than in bringing the local supply of services to the pre-existing levels, critical as it is.

The latter alone is a less than trivial matter. Given the pounding in revenue and the labour resource losses suffered by many businesses, time will tell how fast they can, under the new circumstances, restore the earlier quality of services, let alone their extension.

But any calculus or decision requires a careful look at the other side of the equation. The current situation in mainland China is less favourable to Macau’s accounts than before. Most economic indicators – exports, domestic consumption, and investment, are recovering slower than expected; and concerns about the resilience of some critical sectors, such as construction and finance, cannot be dismissed. As the rebound of the Chinese economy appears less vigorous than many hoped or predicted, the challenges to the local economy may become more complex.

How many visitors will become the norm, and what will their spending profiles be? How long will most visitors be willing to stay, and how will they spend locally?

For instance, the rising share of single-day visitors, reestablishing an earlier and fundamental imbalance in the local tourism economy, is showing up in the data. It certainly benefits significant segments of local commerce, but the cost-benefit ratio for the whole economy is, at least, debatable. But longer-staying visitors with higher value-added spending profiles must be enticed with more than what the local economy has been able to provide.

Without the big gamblers, gambling revenue growth will miss its main pre-Covid driver. It is dubious that the so-called mass market segment can take up the slack. Unless new channels to cater to those players or new sources are found, gambling revenue will have difficulty returning to previous heights. Also, the impact of such changes on the public purse and the breadth of the policies open to the authorities must be considered. These issues will define what the new normality will be. It is likely to look different from the old one.

Macau Business | May 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

In the first quarter, Macau left an extended period of what one might call extraordinarily tight operational conditions. After such long suffering, everyone longs for some cheerfulness.

As movements have been thwarted for an extended period, any hint of freedom becomes exciting; any activity or step suggests great acceleration. As a new dawn shines upon us, some form of collective rejoicing comes easily and is expectable.

And yet, the most challenging part is starting now. Stopping, blocking, or locking are, in operational terms, easier to conceive and enforce. As it were, it’s all about statics, suspending the motion, and stopping the ball.

Keeping things together when they’re moving again, developing alternative solutions, and creating new paths, in a changed landscape are more challenging propositions. They require a sense of the dynamics of complex systems that are not so easier to grasp or emulate.

Sure, if the point was solely to remove barriers and let things get back to what they were before, one might be reasonably hopeful that recovery would happen relatively fast. Yet, there are few reasons to believe the circumstances can or will ever become as they were before. Some moderation may be appropriate here, as it will help make decisions more bound by facts than by hopes, no matter how generous they may be.

Figures from the current year (and its initial recovery) are still limited. But for some significant statistics, data for the first full quarter is available. Even if most are inevitably provisional, they already allow for some reflection based on observation, not just expectation. Remembering the inherent limitations of the exercise, what (slightly unorthodox) indicators can we look into that will provide some basis for further reflection? Here are some examples.

It is indeed good news that the cornucopia has been restarted. It is no trivial change that gambling revenues almost doubled compared with the same period last year. But, on a more temperate note, it must also acknowledge that it was still less than half its size in 2019. To double again what has already doubled is not just more of the same, even if the circumstances were similar – and it is doubtful they are. How far and how fast can we (if we can) get back to similar levels? The first figures of the year suggest some prudence.

If we take as a rough guide the average revenue per visitor, the 1st quarter is below the 2019 standard – but not extraordinarily so, which provides grounds for optimism. Still, that may indicate changing, less exuberant (and still evolving) gambling profiles. Even minor percentage deviations will compound into significant differences over time. And after such a long period of gambling opportunity scarcity, we may be getting an early kick of over-compensation. Prudence in reading these numbers is required.

Questions become more complicated when we consider revenue per table or slot machine. Even though the number of tables and slots declined significantly – by one-fifth and one-third since 2019, respectively—back-of-the-envelope calculations suggest the apparent income per table in this period is noticeably below the previous norm. As a result, adjustments in the number of assets deployed and the average income expectations will be needed.

Similar concerns affect the hotel sector. For all the positive figures concerning visitors and guests, the same kind of rough calculation suggests the occupation was well below the standards observed in previous times.

Recovery can and will continue without the heavyweights that almost put most of the economy at a standstill. But unless one expects to return to operational conditions like those prevailing before, which is a problematic assumption, the coming times will involve sorting out matters of operations’ scale, unlikely to be easy or painles

Macau Business | April 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

National accounting figures for 2022 have recently been released, providing a complete set of data for the three Covid years. As is well known and documented, in February 2020, the economy crashed. GDP fell to values below half of what they were before, and the economy came to a virtual standstill by the middle of that year.

A slow recovery started in the second half of 2020 but failed to gain significant momentum. Nevertheless, the trend extended into 2021, which ended on a more positive note. However, that promise was not kept, and a disappointment was in store for all those expecting rebounds. When many thought things could not get worse, reality proved them wrong.

Frame 1

Before the crash, Macau’s Gross Domestic Product (GDP) stood slightly above 445 billion patacas. Its value peaked in 2018 and was virtually unchanged in 2019. That figure implied an extraordinary average per capita income exceeding fifty thousand patacas monthly. The total population was shy of 680,000, and non-resident workers were approaching the 200,000 level. Expenditure of visitors represented about three-quarters of GDP.

Frame 2

In 2022, GDP was the weakest in the last three years. Contrary to widely held expectations, 2022 was worse than 2020. For the first time since 2010, its total value (current prices) was below the 200 billion mark. In real terms, according to the data just published, the economy size shrank to a level only comparable with 2004. As if the gains of the last 18 years were undone, bringing us back to the very early stages of the “golden years.” As a result, GDP per capita fell to almost one-third of its peak value in 2014.

Frame 3

Private domestic consumption has suffered less. Rough, back-of-envelope calculations suggest that per capita consumption was just 10 percent below its highest level, observed in 2019. This figure, possibly the most encouraging in the overall economic context, still reverses figures seen one decade ago – and completely cancels the sharp rebound recorded in 2021. Families perhaps resisted better due to a combination of factors, likely including but not limited to, the following elements: families drawing on earlier savings, less travel, and redirection of corresponding expenditures to the local market; government subsidies. However, there is no (very desirable) analysis on the sustainability of this relatively bright spot, and the reopening of the economy may be detrimental.

Frame 4

The labor force is contracting. A sustained economic recovery is likely to require new inflows of workers. Anecdotal evidence exists that services in many tourism-related activities have declined in quality, as the compound effects of cessation or extended stoppages of activity, staff losses, and break of routines and supply services have taken their toll. Figures indicate that the total number of employed in the economy dropped by 6 percent, which may be underestimated. The number of non-resident workers alone dropped by more than forty thousand people, and the employment numbers for locals also declined. The full impact of the crisis on employment – in quantity and skills – has yet to be thoroughly assessed, as well as the drag it may impose on any recovery impulse.

Frame 5

The share of visitors’ expenditure in GDP has declined noticeably. The average in the last three years was less than 60 percent of what it was in the three years before the crash. That is a diversification of sorts. However, this change may be predicated on impoverishment resulting from losses at the primary source of economic growth and not so much on the dynamics of new, emerging sectors.

Macau Business | March 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

We are living in a time of significant changes and changeable expectations. A new policy mindset and operational conditions abruptly challenged the model underpinning Macau’s economic growth in the last two decades. As a result, GDP fell to less than half of what it was before, and successive hopes of a revival were essentially frustrated. At various moments, many put great expectations into a recovery that failed to materialise (even if several times foreseen). Here and then, the economy seemed to be picking up, but, in the end, each occasional burst failed to translate into a sustainable recovery.

The train is back on the (new) rails now. Two significant uncertainties were indeed removed. First, the new gambling concessions were awarded to all the incumbents without much of a surprise. The planning and operational horizons widened and now provide some degree of confidence to all the economic agents that depend directly or indirectly on that sector’s performance. Then, the zero-COVID policy reached its limit. Travel restrictions were lifted, and borders are open again. At least, we can look forward to the re-establishment of regular flows of visitors.

Those changes provide a measure of needed stability and put business operations on more solid ground. They can only be welcome, as they could never have happened too soon. However, that does not mean we are returning to where we were before. That station was closed, possibly for good. Yet, the new frame of reference has its own set of uncertainties.

First, all tourism-related services were affected, and that shows for anyone who goes around. Returning to previous standards will take time. Staff, routines, and skills were lost. Supply lines were disrupted or broken – and the disturbance was widespread, extending well beyond our borders.

Then, gambling is unlikely to bring in the same flow of money. The level of political tolerance shrank, and the broader geopolitical framework is shifting considerably. Other competitors vie for the same customers, and local advantages, however they may be defined, are eroding. Signs are competition is increasing.

Further, only time will tell how much the flow of people will recover, both in numbers and spending profiles. The crisis has increased the dependence on our leading market (diversification talk notwithstanding), and the economic conditions observed beyond our borders are less favourable than before.

For local commerce, some advantages persist. That is especially the case for certain goods whose reliability and safety may be more valued on this side of the border. But at this point, the continuity and sustainability of regular flows and improved visitors’ profiles in terms of their duration of stay or their spending patterns are still unclear.

At the same time, concessionaires made significant commitments in non-gambling areas. The results, costs, and conditions for the sustainability of those efforts will be under scrutiny. Unanswered questions are how those accomplishments will be asserted, measured, or ‘verified.’

In the past, great stress was put into some ratios, which are convenient and easy to monitor. But they may raise interpretation questions. For starters, ratios may be tricky indicators. They change because either the numerator or denominator changes – one, the other, or both, at different rates. Different causes may produce ‘positive’ ratio changes but will mean different things, have distinctive impacts, and be unequally desirable.

Moreover, using indicators as policy targets may be fraught with difficulties. As the so-called Goodhart “Law” suggests, when policy indicators become policy goals, they will no longer be good indicators. “Working for statistics” is a common effect of such situations in many areas of human endeavour. The track is still full of challenges and unknowns.

文：José Duarte

經濟學家，《Macau Business》雜誌高級分析師

步入兔年，我們謹慎地加入了樂觀主義者的隊伍，終於不再顯得異常脫離現實。每當提到復甦，各種關於地區發展進程的猜測、預測都成了當下的幻想或一廂情願。誠然，我們迎來了一個全新的時代。

振興道路上的兩大障礙已被清除（絕對沒有其他言外之意）。首先，幾乎不曾經過任何過渡，抗疫政策就崩潰了。與健康、社會和經濟領域相關的損失可在適當時候進行分析和評估，將來必定出現天時地利人和的時機讓我們完成這項工作。當前，最重要的任務是，展望未來，想象那某種形式存在的常態；其次是新的幸運博彩經營批給合同已正式簽訂並生效。觀察的層面更具深度，行動則建基於更堅實的準備。

前方的迷霧是這一特定情況下獨有的，不僅僅是人類活動通常面對的不確定性。這分為三大類：首先，客流的重建，即客流增長的幅度和速度；其次，旅客特徵，包括構成和概況；最後，承批公司必須適應新的運營和監管條件，包括新法和新合同框架提出的限制和義務。

就客源多元化的討論和美好願望而言，本地市場越來越依賴單一市場，即中國內地（若非單一地區的話，那便是鄰近省份了）。引入大中華地區以外的客源始終是一項極具挑戰的任務。令人懷疑的是，過去三年的宿醉能否讓事情變得更簡單？

我們甚至連內地資金流能否迅速恢復也不確定。經濟影響不會突然消失；收入的壓力也不會在一夜之間減退。當春節元素功成身退、後疫情時代真正拉開之時，時間將向我們描繪旅客的主要特徵（來源地、規模、消費模式、逗留時間）。

即便需求確實存在，供給端能否迅速做出反應同樣值得懷疑。就最顯而易見的問題是員工技能和日程、物流網絡和客戶關係都必須經過多年的發展和調整。過去三年間，所有這些元素都遭到了重創，甚至分崩離析。

相比之下，我們的起點非常低。某些時候確實能夠快速增長，但仍與疫情前的數據和收入相去甚遠。這既非天生的缺陷，亦不是必定較以往遜色。在不同的情況下，行之有效且朝氣勃勃的發展是可能的，儘管我們很可能無法重現過去的輝煌。考慮到現有的場地、設備和活動（暫且不用說承批公司承諾的新義務），過渡的順利程度仍有待觀察。

上述各種情況無不表明，確定新的“日常工作”規範需時：描繪旅客群輪廓、穩定客流需時；營運商自我調整以適應嶄新且不斷變化的環境需時；監管部門校準監督力度同樣需時。每踏出一步，都會引出不同的考量。

然而，是的，謹慎樂觀是可能的。現在，我們昂首挺胸地展望未來。這是一個新生的黎明（向 Nina Simone等人致敬）；我們逐步將未來的控制權重掌手中。事實上，前方濃厚的迷霧不曾散去，未來的道路（向Wells等人致敬）仍需時探索，但我們終於邁開了向前進發的步伐。

Macau Business | February 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

As the Rabbit steps in, it is at last possible to be a (guardedly) optimist without looking un-ordinarily out of touch. Talk about recovery, guesses, or projections about the region’s evolution were hitherto set in the realm of fantasy or wishful thinking. We are now indeed facing a new era.

The two elements that presented the most severe obstacles to any sustained recovery path have been removed from the table (pun unintended). First, virtually without transition, the COVID-related policies collapsed. The associated health, social and economic toll will be analysed and assessed in due time, but there is a better place and time to do it. What matters most now is that we can start peering into the future and expect some form of normalcy ahead. Secondly, the gambling concessions were awarded, and the respective contracts were signed. The observation horizon gained depth, and the operations can proceed on firmer ground.

Uncertainties specific to the circumstances, not just the usual uncertainties inherent to human endeavors, are waiting ahead. They fall into three main categories. The first one concerns the reestablishment of visitor flows: how far and how fast will they grow their numbers? Another involves the characteristics of those visitors: what will be their composition and profiles? Finally, the concessionaires must adapt to the new operational and supervision conditions, namely, the restrictions and obligations incorporated in the current legal and contractual framework.

For all the talk and desire for diversification of visitors’ sources, the local market has become increasingly dependent on a single one, mainland China (if not a single region, the neighboring province). Bringing in people from other areas beyond Greater China has always been challenging. It is doubtful that the hangover from the last three years will make it any easier.

Even the fast reestablishment of flows from the mainland is less than assured. The economic impacts are not vanishing suddenly; the income stresses will not disappear overnight. Time will tell what the dominant profiles of visitors (origin, numbers, spending patterns, length of stay) will be when the immediate post-covid and Chinese New Year factors fade.

Even if the demand is there, it is doubtful the supply side can respond quickly. To mention the most obvious issues, staff skills and routines, logistics networks, and customer relations took years to develop and fine-tune. All were severely injured or dismembered in the last three years.

Comparatively, we are starting from a very low baseline. It will be possible to achieve fast growth rates at times and still hover very far away from the pre-covid numbers and income. That is neither inherently bad nor inevitably worse than before. There are different scenarios under which a viable and prosperous evolution is possible, even if, as it is likely, we will not rebound to past figures. How smooth such a transition can be, bearing in mind the existing premises, equipment, and activities (not to mention the new obligations of the concessionaires), is a matter to be seen.

All those aspects suggest time will be needed to fix a new ‘regular-working’ norm. Time for visitors’ contours and flows to stabilize, time for the operators to adjust to new and changing circumstances, and time for regulators to calibrate their ‘hand’ in the sector. Each one brings in specific concerns.

Yet, yes, it is possible to be (guardedly) optimistic. We can now look ahead with increased confidence. It is a new dawn (hats off to Nina Simone and others); we are regaining (some) mastery over our future. Indeed, significant uncertainties have not disappeared, and the shape of things to come (ditto, Wells et al.) will take time to set, but, at last, we started paving the way.

Macau Business | January 2023

By José I. Duarte | Economist, Macau Business Senior Analyst

Two great unknowns hung over Macau for the last couple of years. The first one concerned the continuation of the so-called “zero-COVID” policy and its widespread impacts on society and the economy. The second one involved attributing the new gambling concessions and associated conditions, affecting the main engine of the local economy.

Both unknowns were removed from the table (pun not intended) in the year’s final days. In the wake of those main changes, a return to (some sort of?) normalcy and positive economic momentum is possible. A sustained economic recovery is now, at least, not only conceivable but also likely.

That does not mean the path forward is either obvious or unencumbered by uncertainties that only time can fully clarify. Several unknowns and obstacles persist or are likely to manifest themselves in the times ahead and will shape the recovery, its extent, and speed. There is no guarantee of plain sailing.

First, we will have to deal with the impacts of the new COVID policy. Its sudden reversal raises its own set of uncertainties. As much as the previous policy kept the disease mostly at bay, it also helped make the target population highly, if not the most, vulnerable to future outbreaks. The avoidance focus that has prevailed hitherto mobilized most resources. Regardless of the underlying rationale or any judgement on the policy’s success and sustainability, little was apparently pondered or ‘planned’ for the transition to a new approach.

The capabilities of the health services were not meaningfully reinforced to cope with infection surges a policy reversal would inevitably entail. Such weakness is compounded by the observed under-achievement in protecting the most vulnerable to the disease, namely the older population sections and those with high-risk health profiles.

It all adds to the previous policy’s indirect effects on the functioning of health services in general. Those include, for instance, the losses in the quality of care for non-covid related conditions, especially its consequences in terms of missed or untimely diagnoses, and the breakdown in appropriate treatment courses for many chronic or life-threatening conditions.

The full impact of such conditions on the mortality and morbidity of the population is one of the ‘new’ unknowns. Moreover, how strong and durable the effect of the current (or future, for that matter) outbreaks will be on, say, consumption or the labour market is yet to be seen but will inevitably shape their performance. That will limit the recovery speed and extension and bring back to the fore issues about the resumption of visitors’ flows, their size and profiles, and the nature and size of non-resident workers’ inflows. Both are likely to raise interrogations or concerns in some sectors of the local polity.

The new gambling framework also contributes to the new set of uncertainties. To put it simply, concessions come with shorter time spans and higher non-gambling obligations. Further, sometimes it feels that segments of the population, if not also the authorities, are letting out ‘moral’ reluctance in embracing the activity itself.

Uncertainties or constraints concerning the size and composition of future visitors raise questions on the usage of existing premises and facilities and the profitability of future investments. Moreover, the increased stress on the share of non-gambling revenues further complicates the picture. Whether that is achieved primarily by a rising numerator, or a decreasing denominator is not devoid of practical consequences—both for the economy and society.

But for all the new uncertainties the new framework raises, one aspect is worth underlining. Reality is making a comeback. And that can’t be bad.

Macau Business | December 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

The world over, varying opinions have been expressed about the different possible Covid approaches and policies, both about their general gist and specific components. But, unfortunately, those opinions have only sometimes been perceptibly based on a careful assessment of the merits or demerits of alternative policy measures. Instead, views about the choices are often expressed on crude binary evaluations, possibly driven more by convenience or faith than based on facts and explicit criteria.

Indeed, the questions raised by the pandemic, now reaching its third full year, are bound to be tough, requiring hard choices and touching on sensitive areas. No policy is or will ever be perfect. Any path chosen will bestow some benefits and entail some risks. Indeed, theoretical and empirical knowledge may be missing or limited in certain circumstances. As a result, decisions will be inevitably made with little information, significant uncertainty, and a fair share of unknowns (or unknowable effects).

Costs and advantages will need to be weighted, and their proper measurement or balance will raise delicate questions. Accounting for social impacts is never going to be a precise science. The broader the policy scope and its economic and social implications, the bigger the fog out there, as it were. It will blur the paths to the desired outcomes and the ability to avert the undesired.

Over time, as knowledge and experience build up, corrections and re-tuning will be required. Monitoring and adjustment mechanisms need to be operational. It may be challenging, as routines and interests may have coalesced, and changes may be ill-perceived or even resented.  

A clear and coherent approach to inform the public, particularly its most vulnerable segments, will substantially increase the chances of successful adaptation to changing circumstances and reduce the material or emotional pain the population bears.

Actions should be informed by a broad analytic framework and calling in various types of expertise. Their possible effects, good or bad, intended or unintended, must be anticipated as much as possible. Different segments of society will be affected differently. The social distribution of costs and benefits raises another set of sensitive fairness and justice issues.

Multiple variables and parameters come into play in a crisis such as the one we are going through. First, there are the obvious direct health-related outcomes, namely those relating to mortality and morbidity avoided, and the respective costs of prevention and treatment. Then, we must recognize the possible side effects on the provision and quality of other health services, as their resources and operation will also be affected. Standards of care and treatment may decline elsewhere, also affecting their mortality and morbidity profiles and raising the longer-term quality of life issues.

Then, all sorts of societal effects are inevitable, abundantly reflected in the news and statistics—disrupted economic activities, declining incomes, and rising unemployment, to name the most obvious. On social and personal levels, the loss of livelihood and disruption of social networks will bring uncertainty, insecurity, and isolation that can be socially and personally devastating.

Assuming good faith and public commitment, nobody would want to be charged to formulate, make, and implement those decisions. But choices are inevitable about the best available and affordable care. Systematic and comprehensive processes will increase the chances of reaching better decisions and reduce the likelihood of significant mistakes.

Openness about the purpose and criteria for the decisions, and candid recognition of what we don’t know or cannot control, can go a long way to promote good, evidence-based practices and raise public resistance to the inevitable weariness that time will bring. Indeed, some luck will always add to the mix, hopefully of the good type. But health policies that do not look beyond the immediate and obvious and adapt as times change are bound to be judged poorly and have high unintended direct and indirect costs.

Macau Business | November 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

For a long time, Macau’s financial reserve mirrored the confidence and achievements of the local economy. Its total amount rose steadily for many years, underpinning public finances whose health seemed impregnable. The pot increasingly looked inexhaustible if ever its usage would be needed. Even amid a good part of the COVID years, the total amount kept rising, reaching its peak by mid-2021.

The weather has changed noticeably, though, and the reserve has been under pressure lately. There were occasional dips into the red in the past, but the overall trend was unquestionably skywards. Not so anymore—or so the latest figures indicate.

At the beginning of the year, the total reserve was five percent below its highest recorded value. Since then, the losses sustained have bred concerns in some social quarters, occasionally tinted with some sense of alarm. There may be reasons for genuine concern, but if there is to be one, the debate must be set out in an appropriate context.

First, while there is no question that the reserve funds must be used under criteria of both efficiency and fairness, their usage is not to be reproached. Reserves are created to be used when conditions are adverse – and there is no question the current crisis fits the “rainy days” metaphor used in their constitution.

Secondly, the recourse to those funds must always be a palliative measure. It alleviates the pain but does not treat the underlying causes. Unless we expect the patient to die and give up all hope, the absolute priority must still be to deal with the sources of the illness or dysfunction. One cannot abandon or even deviate from that objective, to be achieved at the earliest, just because the pain was momentarily lessened.

Thirdly, the size of the reserve accumulated through the golden years provides an extensive financial buffer. So big it is possibly beyond the ability of anyone to deplete at short notice. Its amount far exceeds what would reasonably be adequate for this type of fund. The existing reserve could sustain the current budget level for six years without any additional income. If anything, the concern here should be that the depth of the cushion may breed complacency and lead some to underestimate the urgency of the matter.

In such a context, the available figures for the public finances’ execution, in the current year, up to the third quarter, bring forward some sobering thoughts.

By the end of the third quarter, the actual income received from the gambling concessions – the primary source of public revenue and the stepping stone of the local economy – stood just above 15 billion patacas. That represented less than half the total amount initially forecasted and was just one-fifth of the amount recorded in the last ‘normal’ year, 2019. Further, it was still 30 to 40 per cent below the figures for the same period in the two previous ‘crisis’ years.

Indirect taxes, another gauge for economic activity, including commerce and tourism-related businesses, stood below expectations at about half the figure in 2019. Again, also well below the figures for 2020 and 2021.

Public expenditure, however, rose compared to 2019. That is the case of staff expenditure (somewhat surprisingly, up by 7 per cent in this critical period) and public investment. The latter’s cumulative value stood at about 10 billion in September, almost seventy percent above the figure for 2019. But this public “compensation” weight on the overall economic fabric is limited.

These figures suggest we are not getting out of the hole, as many expected; as a few feared, it seems we are digging deeper into it.

Macau Business | October 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

About one and half centuries ago, a French economist wrote a piece that should be mandatory reading in all social sciences’ academic curricula (I dare to say). His name, not well-known outside economic circles, was Frederic Bastiat. The book I’m referring to includes a series of what we nowadays would call ‘papers,’ under the general title of “Ce qu’on voit et ce qu’on ne voit pas” (usually translated as “That Which is Seen, and That Which is Not Seen”).

It is worth quoting briefly from the introduction: “(…) an act, a habit, an institution, a law, gives birth not only to an effect but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen.”

That is true in the realm of economics, which Bastiat had in mind, but seems easily extensible, as he also pointed out, to almost any field of human endeavour. Indeed, that also includes all matters of public policy.

Indeed, many areas of public policy deal with relatively limited and mostly uncontroversial issues. Others have broad implications, cutting across several areas of social organization and human behaviour and touching on sensitive matters felt by broad constituencies. As the number of factors to ponder rises and their time frame lengthens, complexity will increase, and the amount and nature of effects to account for, at least ideally, will increase.

Inevitably, complex issues and their associated policies will translate into multiple, possibly contradictory, when not opposing, effects. Some of these effects will be expected; others will not. Some will be minor; others may bring more considerable and surprising challenges to policymakers. Some will manifest themselves at short notice; others will take extended periods to become apparent. Some will be self-correcting and ephemerous; others will give rise to unpredicted or long-lasting impacts.

Evaluating the merits of a public policy, especially if falling under the latter circumstances, is an exercise fraught with difficulties and unknowns. Health policies, in general, and especially pandemic-related measures, fit into that category. Its impacts are likely to be (very) broad and long-lasting; they may give rise to almost intractable new problems, if not painful dilemmas. At times, they will involve, literally, matters of life and death. These are not issues one should tread on lightly.

As Bastiat stressed, we must take into “account the effects that are seen, and also those which is necessary to foresee.” The complexity and breadth of issues brought forward by such policies are hardly compatible with expeditious judgments about the merits of any specific approach, much less for sharp and definitive pronouncements. Often, such verdicts likely stem from prejudice or bias based on little or superficial thought.

The ongoing pandemic, and the policy measures to cope with it, do certainly fit the “complex” profile outlined above. The health, psychological, social, and economic impacts are evident, significant, and likely to prove long-lasting. All that suggests that a broad, sober, sustained public debate should be held regularly. So that policies are designed, implemented, and adapted considering their wide-ranging impacts, their unexpected turns (good or bad), and the welfare of those who bear them.

Indeed, the dynamic nature of these matters calls for continuous monitoring, and requires a permanent willingness to learn from experience, the hits and misses from our or others’ previous actions and measures.

In Bastiat’s words, we have “to learn from very different masters: experience and foresight.” But foresight is a “more gentle [master]. Experience teaches effectually but brutally. “

Macau Business | September 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

As nobody will ignore, we lived until recently our casino-driven golden years. Casinos were the engine for extraordinary economic growth in the last twenty years, the occasional hiccup notwithstanding. The sector’s dynamism offered direct employment for many, making it the leading employer in town. In addition, it spurred the development of many other activities. It helped bring about a steady flow of tourists providing a fair share of many local businesses’ income. Furthermore, the region accumulated reserves beyond anyone’s imagination.

For all the social or environmental ills many people associate with it, gambling contributed to rising standards of living and brought service delivery standards to previously inexistent levels. Over the years, it has also fed public coffers with a happy flow of income. The reserve thus created can (and has been) used to mitigate the effects of the current and previous, albeit not so acute, crises and is counted on as a source to fund activities meant to spur the so-much invoked diversification.

That age seems now in its twilight, and it is not clear what will come its (and our) way in the months ahead. Since the sector was somehow deemed a national security concern, it was most apparent that change would come. Both its operation mode(s) and dimension are likely to change markedly in ways that are yet to be clearly outlined. There is neither a clear idea in the public mind about what the sector’s future may be nor what exactly the authorities expect it to become.

Darkening the clouds, the pandemic took a severe hit on the sector, compounding the insecurity felt by its operators. But its immediacy notwithstanding, Covid is not the only or arguably even the most profound source of the uncertainty clouding the sector.

As the rainy days stay with us for much longer than anticipated, the reserve is increasingly used to soften the sharper edges of the times. Its latest level was about 10 percent below its peak about one year earlier, and the last few months suggest an acceleration in its usage rate. Not that the reserve will disappear any time soon – but the ‘comfort’ it provides may breed complacency and blunt the sense of urgency for other necessary changes and adjustments that, if absent, may hinder a recovery when the opportunity finally arises.

Changes in the industry are bound to impact public revenues and the policy tools and goals they support. Sustained changes in the flow of income for the government will affect both the structure of public revenues and its expenditure patterns. A declining sector will also mean fewer resources for other social and economic objectives. Then, as the crisis persists, the region’s social and economic (not to mention health) fabric deteriorates. Confidence and initiative will weaken and may take ever longer to recover.

Indeed, it would have been wiser to ponder at the beginning how the sector’s extension and growth rate would bear on the city’s social and physical fabric. Yet, no matter our take on gambling activities’ economic and social merits or demerits, there is no short-term alternative to its leading economic role. Rounds of reserve money are a palliative, not a cure or a sustainable economic model.

Today’s options cannot be based on what might have been some twenty years ago or what we strongly fancy tomorrow’s ideal. Instead, the reality facing us today and its viable alternatives, imperfect as they may be to us, must shape our purpose and actions. A tamed beast may be an achievable and worthy mission. A replacement species, no matter the intentions, may prove unwise. Indeed, as yet, there is no such apt creature at hand.

Macau Business | August 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

The horizon line remains blurred two and a half years into the pandemic crisis. The second half of 2020 showed some promise that 2021, in the end, could not fulfil. First semester figures for the economy were not too inspiring.

Optimists that maintained hopes that 2022 might be the recovery year have possibly buried those hopes by now. Pessimists may be forgiven if they fear the lockdown (still on at the time of writing) will not help the second-half figures to improve. If anything, a lucid look around may suggest we are reaching the point where the economy and society should be considered in ‘disaster’ mode and must be dealt with accordingly.

Tourism demand changed in ways that are not easily reverted. At this time, our primary visitors’ sources are either too unreliable or too limited to support any meaningful recovery; alternatives are simply locked out. Lockdowns and the almost permanent threat of their recurrence present a challenge for many travelers.

The diversity of regional regulations and travel restrictions can only compound the risks associated with travel and will keep the eyes of those that travel (at all) elsewhere. Sources and flows of tourists dried up or were diverted; they may not be easy to revive.

There is no clear way out of the current situation. On the contrary, the extant policies to deal with the pandemic, regardless of how one may judge their appropriateness, raise the possibility of a perpetually returning state of exception. There are scant indicators a change will happen in the short-term, if at all on the observable horizon.

Even in the unlikely circumstance that traveling and the general conditions surrounding the local economy were to return to normal, it is doubtful the response might be swift and effective. The local tourism services’ supply capabilities were seriously affected.

Operational and training routines were disrupted; many workers left, voluntarily or not, and their replacement still poses a significant challenge in most if not all sectors of activity. As a result, ensuring the continuity of operations and the maintenance of service standards is and will be a challenge.

Among the tourism segments, the casino industry is the only one that can be relatively independent of the actual flows of visitors – if their patrons’ pockets compensate for their reduced presence, that is. But casinos are facing the penury of gamblers and bets.

The main driver for the existing economic model is sailing painfully through very troubled waters. The continuity of the model that kept the economy running and the public coffers full is obviously at stake. With the new concessions on the table, it is unlikely the situation will change significantly in the coming months.

Other tourism activities do need real visitors. Hotels, restaurants, and most shops depend significantly on tourists showing up at their premises. If they don’t, these businesses have limited ways to compensate for the loss of their customs. And that is the bulk of the local economy. Yet there is hardly any activity that is not directly or indirectly affected by the vigour (or lack thereof) of tourism activities.

Further, other no less important activities may be suffering in ways that are not so immediately visible but are critical for the general well-being of the population. There are signs of lowering standards for important social aspects such as health care and education, not to mention leisure and others that play vital roles in the overall welfare of the population (and the labour force’s productivity).

Under such a framework, awarding the new gambling concessions raises an interesting but not necessarily desirable challenge. What operating conditions can the authorities credibly guarantee and what commitments can the candidates reliably pledge?

Macau Business | July 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

In many parts of the world, tourism provides, directly and indirectly, a significant share of people’s income. Further, it is labour-intensive, with staff needs covering the full spectrum of qualifications. That means it is also a critical job provider for the less skilled segments of the labour force.

Efforts have been made over the years to find reporting procedures that follow and are compatible with the national accounts while highlighting the unique role performed by tourism-linked activities. One such tool is the so-called Tourism Satellite Account (TSA). It complements the system of national accounts centered on the calculation – or, more appropriately, estimation – of the National Gross Product and related statistics.

TSA includes several ‘specialized’ tables and calculates some relevant ratios. For clarity, let us briefly describe its main elements. First, the account attempts to estimate the direct consumption made by visitors in the various tourism-related activities. These activities will, as a rule, produce goods and services also used by the residents. Then, comparing the visitors’ consumption with the total supply of those sectors, we can compute a ratio representing how much tourism weighs in those activities– and how dependent they are on the business generated by tourism. Finally, we can estimate tourism’s Gross Added Value (GAV) and its contribution to the overall economic activity.

These figures are relevant for any careful analysis of tourism activities and their impact on the local economy. Unfortunately, they are usually out with a significant delay, which limits their usefulness for on-going policy monitoring and adjustments. TSA results for 2020 have just been published. They hint at the damage that has been and is being inflicted on this economy since the COVID outbreak.

Remember, the first month of that year was still a ‘normal’ month. Its economic figures represented, for most indicators, a slight contraction compared to the previous year. They would follow a slight downward trend that started several months earlier. But overall, they would fit and were not far from the regular oscillations of economic activity.

In line with most indicators, direct consumption made by visitors in 2020 dropped sharply to just one-fifth the value recorded in the previous year. But the impact on the various tourism-related activities was not the same for all.

Typically, gambling expenditure accounts for more than 80% of total tourist expenses. The sharp contraction registered did not change that feature; if anything, it reinforced it slightly.

The stronger contractions were indeed borne by the other typical tourism-dominated services – food and beverage, accommodation, and transportation – which contracted by more than 80 per cent. But none reached the level of travel agencies, which saw their visitors’ derived revenue drop to a mere 10 per cent of the 2019 figure.

Inevitably, gambling aside, all activities saw their tourist ratios decline. Gambling by residents is marginal, usually no more than one or two per cent of the total. That did not change in 2020. But, again, travel agencies were the most punished. Overall, the contribution of tourism to the region’s wealth dropped from over half of the economy to just 21 per cent.

These are dramatic figures. All we have seen since then suggests the prolongation, if not the deepening, of the economic agony and impoverishment well-illustrated by those figures. Such conditions are not sustainable, as should be evident by now. Existing labour and financial buffers cannot substitute for a functioning economy, and their mitigation powers are eroding fast. We must start measuring the costs and benefits of the current policies comprehensively, not only for their immediate economic impacts but also for their medium and longer-term effects, including their broader social and health consequences.

Macau Business | June 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

Gross Domestic Product figures for the first quarter give us reason to be kind of blue (apologies to Miles Davis). When we would expect things to be picking up, two full years into the pandemic, the numbers are not only in the red – they appear to be getting a darker hue.

 GDP was down nearly 9 per cent at current prices compared to the same period last year. The same figure one year earlier was close to minus one per cent, a comparatively insignificant number. Especially if we bear in mind that the denominator for the ratio then was the 2020 first-quarter GDP, which contained the last ‘normal’ month before the crisis.

The growth momentum seems totally lost for the moment. The recent Labour Day failed to meet expectations – again. It was another missed steppingstone in a long row of unfulfilled promises. Just as it was the case before with the Chinese New Year week; and the Christmas and New Year period before that – and we could go on through earlier periods that raised similar expectations that were not met.

The borders remain closed to most, if not all, foreigners. The flows from Hong Kong and Taiwan are yet to restart, and no clear path or schedule exists for that purpose. Until recently, the only source with a modicum of vitality was mainland China, albeit at a much-reduced level if compared with the standards set before the crisis. Even there, things appear to be changing for the worse, as various regional COVID outbreaks and lockdowns of varying intensity pop up. Further, there seems to be an active discouragement for people traveling.

A tourist economy without tourists is not just an oxymoron; it is a practical impossibility. The prolongation of the situation, without an end in sight, raises increasingly awkward questions about the survival of many small businesses in town; and the viability, on the current configuration, of casinos, hotels, and integrated resorts built to accommodate flows of tourists ten times bigger.

 Indeed, these facilities can be profitable under various (stable) scenarios concerning both visitor profiles and flow sizes. Still, it is doubtful the current situation can be sustained for much longer without permanent staff redundancies and premises deactivation. On present trends, we seem bent on a protracted demise, with significant destruction of the region’s economic structure.

Pain can, here and there, be somewhat alleviated with palliative measures, such as the soon-to-begin consumption subsidy. The restart of such a scheme signals the renewal of the government’s commitment to lighten the burden imposed by epidemic control measures. But it is unlikely to produce more than a minor effect.

 First, the size is modest. For practical purposes, forget the two components structure – a ‘base subsidy’ of five thousand patacas now, complemented with three thousand later, depending on the actual usage of the initial credit. We are talking about eight thousand patacas for residency cardholders, the equivalent of about 670 patacas per month.

The subsidy may be significant for people on a very low income or people losing jobs and their main, if not the sole, source of income. But it is surely not life-changing for anyone. Further, even ignoring questions about the actual impact on overall private consumption, the involved expenditure represents a minor share of families’ consumption and is almost negligible in terms of total income.

 Any credible, sustained recovery needs the confidence that only increasing numbers of visitors can bring and assurances on the government’s commitment to such purpose. Otherwise, we are condemned to occasional and increasingly unsustainable attempts to limit damage as a slow-motion crash progresses before our (wary-ish) eyes.

Macau Business | May 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

The diversification of the Macau economy has been on the public agenda for at least three decades now. It is a significant concern for many, and its visibility has only increased over time. Yet, it is unclear whether we have always been talking about the same thing or its pertinence and meaning have not changed with the marked changes in the local economy and its external framework.

In the late 80s and early 90s, the issue was framed by the unknowns of the transition to China’s sovereignty of what was, for all purposes, a small enclave economy. It was then not clear that, after 1999 gambling would continue, given the ‘proscribed’ nature of the activity beyond the Border Gate. An early effort at diversifying the economy might be a matter of life and death for the region’s future prosperity. 

Another concern was the death foretold of the leading manufacturing activity, the textile industry. As negotiations to liberalise textile trade in the world and for the accession of China to the World Trade Organization proceeded, it was becoming clear that the industry was under a terminal threat. Macau would lose one of its economic pillars, as the industry was bound to disappear, if not totally, at least to a considerable extent.

Further, although no one would dare to venture a date for such to happen, part of the visitor’s flow was associated with the absence of direct flights between the mainland and Taiwan. But there was the notion that the situation would not persist forever, increasing the economy’s dependence on Hong Kong visitors. Remember that flows to and from the mainland, especially the latter, were virtually non-existent.

That context has profoundly changed, as nobody will be unaware. So, while the game’s name is still the same, we may be talking nowadays about something different.

In a way, Covid and the sanitary measures adopted have raised the stakes, no pun intended. The weight of gambling has indeed declined overall, and some may claim that brings about a forced diversification of sorts. But that is not the diversification one would have in mind. It is not the outcome of the development of alternative economic activities and sources of income; it is the result of a severe weakening of the economic cornerstone of the economy—consequently, more the harbinger of impoverishment than of newly found sources of prosperity.

Truth be told, none of the alternatives that have been mentioned with some frequency seem to have gained significant traction. Let us even set aside the chronic labour issues, with its generally known availability and qualification issues, and real estate costs, which are noticeably less than new-business-friendly. Each of the most often suggested alternatives– financial services, traditional Chinese medicine, creative industries, to give some of the examples more commonly put forward—comes with its own specific types of difficulties that cut across the board. But let us leave that for another occasion.

Anyway, while there is nothing wrong in attempting those (or other) avenues for diversification, no one should have any illusion that success can be fast or hinges mainly on assertions of intent and assorted laws.

Yet, we might leave all or most of that aside; maybe we need to throw a fresh look into the matter. Macau’s present overriding policy objective is its rapid integration into the designated Great Bay Area. Why should it be a problem that a small and well-circumscribed ‘neighbourhood’ in that broad, vibrant, populous, and economically diversified area would have a tourism-based economy as its specialization, building primarily upon gambling and entertainment of both the cultural and purely fun varieties?

Macau Business | April 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

Public policies are often hard to design, implement and evaluate. The broader the topic and the bigger the potential impact of the policies, the greater the associated uncertainties and operational complexity. The needs for both focus and context will often conflict. 

It is as easy to define the immediate objective and observe its direct effects as it is to lose track or fail even to anticipate unintended, delayed, or indirect effects. Longer-term and harder-to-see consequences may not be less important than the most immediate tasks and targets – but weighing them in may prove hard.  

Be what may, we still need to design such policies as thoroughly as achievable, mobilize all the resources we can to implement them, and evaluate our performance to learn lessons that will serve us better in the future.

Public health matters, especially those concerning, as is the case today, new epidemics, are among the severest challenges for public authorities and the public alike. They can have profound and lasting impacts on multiple social levels and are, for many, literally, a matter of life and death. 

Further, they can easily lead to social antagonism, complicating even the best efforts to quell the spread and minimize social and economic impacts, themselves sources of other problems. Ignorance and fear – a terrible blend – may take prominent positions on people’s perceptions and opinions. People in authority may add to the disarray, failing to convey timely and appropriate information and assurances. These are not matters to tread lightly or opportunistically. 

A new pathogen brings a new set of unknowns. Experience from earlier outbursts of other pathogens will provide precious guidance but cannot fill in what we don’t know about the new germ, which only time and experience will allow us to find out.

Moreover, given the uncertainty, alternative evolution paths need to be mapped and ranked based on their likelihood and impact. Preparations must be made for path corrections or transitions, but this adds stress to the available resources. Staff with the required qualifications in the required numbers may not exist. 

Yet, paraphrasing a Portuguese saying, we can confidently say no evil never ends. Sooner or later, we will be out of our current predicament. As a matter of sound public policy, time will come to evaluate, here as everywhere, the various administrations’ acts during the crisis. Indeed, nobody expects anyone to have been perfect; that would be beyond the human realm. But three issues will be prominent in that examination. 

First, how well-informed and risk-aware were the ordinary persons, without having unwarranted fears or unsubstantiated beliefs? How did the authorities convey accurate, valuable, and timely information to the public and adapt it to changing circumstances? 

Factual, usable information is not a minor issue. Half the battle is possibly won if individuals and families can take care of and protect themselves adequately, pondering their specific circumstances and risks. 

Second, how successful was the drive to protect the general population? Mainly, what was done to prevent, first, and then treat when needed, the most vulnerable groups, including older adults and those with pathologies known to make them exceptionally vulnerable.

Finally, how were other costs factored into policy assessments and decisions? Namely: other health costs (untreated or undiagnosed conditions, lowering of care, for example); social and psychological costs (mental health, social isolation, educational standards), and economic costs (loss of jobs and income, economic inefficiency).

The aphorism mentioned earlier also says “No good ever lasts.” As fatalistic as it may seem, it is undoubtedly true. We will need all the lessons we can muster from this crisis one day.

Macau Business | February 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

Few people will question that the Macau economy is one of a kind. Possibly almost since as far as living memory can take us, it has been customary referring to its distinctive characteristics, observed or presumed, as the local “idiosyncrasies.” Indeed, the expression might sometimes be interpreted with a whiff of irony, as if stressing the peculiar, if not odd, or eccentric side of a particular feature under observation.

Clearly, the local economy has distinctive aspects that it would be unwise to dismiss, whatever we may think about them. Of course, many factors contribute to that: history, geography, social composition, economic structure, all bring something unique to the city. The outcome is that some aspects of Macau’s economic behaviour and performance may not be easily compared to other places. Especially if we are talking about bigger, more complex, and diversified economies, or what we might call, in some measure, more ‘complete’ economies (if the expression is allowed.)

We deal with a small enclave economy, highly specialized in a few activities, and almost wholly depending on tourism and gambling. That is, the idiosyncrasies exist and must be factored in our analysis. They should be explained and become part of understanding the workings of the economy and society. They may call for less adherence to formal models of analysis, which are possibly more adequate to the observation of other places. Otherwise, we are condemned to note the singularities without necessarily grasping their causes or consequences.

Recognizing their existence alone does not have a strong explanatory power. Not much deeper, anyway, than the one often articulated in the common expression ‘Macau sã asi’ (‘that’s Macau’, in a free translation). An expression that often purports to ‘explain’ a lot without really clarifying much. Suitable for a smile of complicity and argument closure, maybe, but hardly explicative or illuminating.

This long introduction suggests that some of the unexpected or uncommon features of the local economy deserve more attention and study and may call for alternative frames of observation and analysis. Under the common observation tools, some features may be hard to explain.

For instance, it is patent that the drivers of the economy are jammed. Both gambling revenues and visitors’ flows are just a fraction of the figures we got accustomed to. Successive recovery expectations over the last two years or so fell short. Even the better figures seen around some of what used to be the peaks of activity failed to re-ignite the growth engine in any meaningful way.

Yet, unexpected data keeps flowing from the official statistics. The labour market is a case in point. The economy’s main sectors are sputtering, non-residents workers number is going down, the population is aging, there is anecdotal evidence of population outflows, the labour participation rate is decreasing – yet total employment figures are essentially holding out. While higher than in pre-pandemic years, the unemployment and sub-employment rates both appear still very low given the overall economic conditions.

Further, official data suggests that housing prices, at least for acquisition, seem insensitive to these unfavourable economic trends. The wages median seems as resilient, mostly resisting the headwinds. Surprising figures show up in retail and other activities supposedly depending, in no trivial measure, on the ebb and flow of tourists.

Other considerations aside, all this suggests there is no standard formula for the way ahead. Returning to the earlier status quo is not viable. But that alone does not guarantee the feasibility or adequacy of all alternative proposals under consideration. Returning to health may require more ‘customized’ prescriptions than we may sometimes realize – but that’s our homework.

Macau Business | February 2022

By José I. Duarte | Economist, Macau Business Senior Analyst

The Legislative Assembly is currently discussing the changes to the gambling regulations. Once passed, a negotiation period for the new concessions will open later this year. Meanwhile, the gambling inspectorate is reviewing and, at times, renewing the junket licenses. Both issues are full of implications for the future shape of the sector and its regular operation. Until the new frame settles, our analyses will be stronger on speculation than facts.

For now, we must deal with the facts on the ground and what they can tell us about the future, whatever the precise configuration of the new era that is now brewing will take. Data for the whole year are coming out and can help us frame the challenges that will persist.

Let us start, with no surprises, with the gambling figures. The final numbers for 2021 were up by more than 40 percent. That is a positive development; indeed, no one should be exaggeratedly carried away by this figure. We are recovering from a shallow base. That revenue was still less than 30 percent of the 2019 value.

The combined revenues for 2020 and 2021 amounted to half or less than the values recorded in either of the two previous years. For the sector to reach three-quarters of the 2019 revenue, bets would need to grow 2.5 times this year. Nothing suggests that such a growth is remotely plausible.

On the contrary, strong winds are pulling against the primary source of revenue, Baccarat. First, the evident reduction in junket activity will limit the promotion activities and the ability to bring in customers. Second, we can expect a natural reluctance of their customers to appear in Macau in association with a business clearly in the authorities’ crosshairs, not to mention being conspicuously visible in mostly empty casinos.

Table performance will stay far from what was common in previous years. The sector potential will continue markedly under-used. The under-employment of existing resources will extend to most related economic activities: lodging, food and beverage, shopping, or other supporting services.

Another significant indicator far from its usual levels is the number of visitors. Here, the figures and circumstances do not seem favourable either. The main impact is not so much for gambling, as its revenue is relatively independent of the number of visitors – their profile matters more. But for many smaller businesses in town, the absence of actual customers deals a severe blow.

The prognosis is reserved. Figures are even more striking than in the case of gambling. Compared to the year before, the visitors’ growth in 2021 barely exceeded 30 per cent; and the combined figure for 2020 and 2021 amounted to just one-third of the number observed in 2019.

The pandemic further concentrated the sources of visitors, increasing the (already very high) reliance on mainland visitors. They represented alone, last year, more than 90 per cent of the visitors. The timing for opening to other regions or countries, including Hong Kong (our second most important source), is uncertain and contingent on unpredictable outbreaks. In the present circumstances, the persistence of the current anti-epidemic policies can imply a continuing, open-ended stop-and-go regime.  

In the last two years, the economy lost momentum. Physical resources are under-used. Staff was reduced, routines were lost, and the pool of skills shrank. The flows of tourists dwindled, as did travel risks. Re-opening travel channels will take time. The resulting difficulties cannot be overcome instantaneously. The path ahead is unclear. Its inherent unpredictability is compounded by the uncertainty about the future concessions’ operational setup and the unknowns associated with the pandemic control approach. One should not expect an early arrival of the recovery.  

In times of significant economic stress, the real estate sector is often one of the most affected and an indicator of the economy’s difficulties. Some signs are well visible. The increasing number of shops with their doors temporarily or permanently closed is a case in point.

Some streets where commercial activities used to be numerous provide images with rows of lowered front shop blinds nowadays. Complaints of shop owners or attendants about the shortage of business are shared. Overall, one cannot avoid the vivid impression that many commerce activities were severely battered.

 As for that situation in the housing market, casual conversations frequently suggest that rents are going down, which is plausible given the last two years’ predicament. There are tales of people losing jobs, either because they cannot return or are leaving, either by will or lack of an alternative.

In addition, anecdotal evidence suggests certain residential areas are losing a non-trivial share of tenants. Some of those remaining are moving into cheaper premises or getting better rental terms on the existing ones.

\All that appears to be commonsensical and in tune with what we listen to and observe. Yet, the statistical data – or, at least, a considerable part of it – seems to tell a different, in not conflicting, story.

Indeed, construction activity slowed down noticeably. The number of residential units and shops started in recent years was a small fraction of the typical figures in the previous periods, and only now do they appear to be recovering. However, the contraction predates the pandemic outburst, which suggests other factors were at play. The same might be said about the total transactions concluded in those years or the volume of new loans for housing acquisition. 

As for other indicators, they hint at a health status that is a bit puzzling. In the last three years, the average price for the sale of housing units kept rising for buildings under construction and, at most, just stabilized for existing buildings—no sign of depression there. A hiccup in 2020 apart, the same may be stated about the sales for commercial spaces.

The (composite) price index for housing evolution mainly confirms these trends. The overall index kept virtually unchanged in the last three years, ostensibly insensitive to the economic distress occurring around. For housing units under construction, the index reached in 2021 its highest level ever, having risen by about 50 per cent in the last five years. 

The latest unemployment number, just released, breaks the three percent barrier for the first time since the pandemic started. The average for the last three months of the year was 3.1 per cent, a value not seen since 2009 in the wake of the financial crisis.

Indeed, the rate for the residents is higher. As a rule, unemployment is not an option for non-residents. Therefore, in the same period, the locals’ unemployment rate was a whole one percentage point above overall value. 

The rise in underemployment figures was more visible. For both overall and residents’ figures, it went from values around 0.5 per cent in 2019 to values hovering between four and five percent in 2021. 

Still, these figures appear smaller than what one might expect given the depth of the contraction in the last two years and the feebleness of the recovery. In the earlier times of the pandemic, there was a (perhaps too) limited impact on the unemployment figures. Several reasons might help explain that.

First, part of the shock was absorbed by non-residents. They were either in the first line of dismissal or, being away at the time, prevented from returning. Then, several approaches short of firing were used: lay-offs, compulsory holidays, reduced working times (and remuneration). The statistics are not designed to capture those somewhat ‘non-standard’ situations.  

As time passes and the activity stays far from pre-pandemic levels, some of those situations will become unsustainable, which will start to show in the statistics. The combined value of the unemployment and under-employment rates was reaching nine percent in the second half of 2021, almost triple the level in 2019. 

At the same time, the total number of locals employed is recovering to levels on par with those existing before the crash. Yet, participation rates are lower than before for both men and women. That implies a population and labor force growth, which the internal population dynamics cannot explain easily. Further, only two age classes in the labor force show gains.  

One is the larger class and includes people between 35 and 44 years old. The other has people over 65 years old. Numbers less significant here: a slight increase associated with the general aging profile of the population. All other classes of age shrank. Almost alone, the former is driving the employment numbers up. Such is an outcome mostly unexpected at a time of economic distress.

The statistical department compiles two series of consumer price indices. One represents the typical consumption of residents’ families (Consumer Price Index, CPI); the other, goods associated with our visitor’s consumption (Tourist Price Index, TPI). Some of the categories used in each index are similar; others are naturally different. After all, tourists’ profile consumption is naturally distinct from the residents. Note that CPI is estimated monthly, while TPI figures are published quarterly. 

In both cases, the data for the entire 2021 are available. CPI indicates an increase in prices at about 0.03 per cent – virtually nil. TPI points to a decrease in prices of about 4.7 per cent.

As 2020 was also an out-of-the-ordinary year, that comparison may be less meaningful than would be the case in more ‘normal’ years. However, if we compare the price indices for 2021 with the corresponding ones in 2019, the changes become more noticeable. In that period, tourist prices dropped by 12.5 per cent, while consumer prices went up by a still minor number, just below one per cent.

Either way, these results suggest that concerns about inflation, touching other parts of the world, do not seem to be justified here. Setting aside concerns about the adequacy of the ‘baskets’ used in their computation, a more detailed look may raise questions not apparent in the overall indices. Being weighted averages, they may hide considerable variations in specific categories. 

For instance, the changes over 2019 for food, health, and education, are the highest among the various categories used in the computation of CPI. They rose neatly above the average, with figures ranging from 3.6 per cent for food, 4.4 per cent for education, and 5.6 for health. In the crisis context, these are not trivial figures. Their impact in the index is mainly hidden by the drop in clothing prices, the most ‘deflationary’ category. It dropped by more than 10 per cent in the last two years. 

Such kind of divergence is more pronounced in the case of TPI. The point here is that if we take aside the heavily weighted items “Accommodation” and “Clothing,” the picture changes. Other prices are holding or even rising. Given the significant loss of tourists and the resulting drop in overall demand, these results appear slightly counter-intuitive. Part of the explanation may be that consumption patterns are changing. Also, it may signal price pressures are building up elsewhere. Or, maybe, the index is up for technical review.

Data from last year’s Census is coming out when most attention is focusing elsewhere. Undoubtedly, demographic data rarely call our attention or grab the headlines except when some prominent feature, often a perceived imbalance of some sort, reminds us of its undercurrents.

Then we realize that we are observing the outcome of events or decisions taken long ago. Its effects are never easily reverted, and whatever actions we decide on will inevitably take a long time to produce effects. It is, in many ways, that long lead time that keeps demographic issues usually in the background, overcome by more pressing matters. 

The lack of immediacy, if we can put it that way, makes demography the poor cousin of social sciences – seldom remembered and mostly annoying when we must. But we would be unwise, I believe, to ignore its impact if we want to raise the eyes above the short-term horizon.  

As the Macau economy grew driven by the casino boom, its population grew fast. The boom occurred, however, when the effects of earlier natality trends were starting to bite. From the 1980s to the end of the century, Macau saw a steady and fast decline in births rates. By the beginning of the new century, they were about one-fourth of what they were before.

When the ‘new’ economy needed them, the necessary local workers were missing. Obviously, the only answer was a significant rise in imported workers. The continuation of very high economic growth rates would require increasing numbers of non-residents, which raises other social and economic issues, but let us leave that aside here. 

The fact is that the number of locals arriving at the labor market cannot compensate those leaving it, let alone sustain the previous growth rates. Indeed, there was a temporary pick-up in birth rates at the beginning of this century, presumably associated with the rising prosperity of the new casino era. But numbers receded again meanwhile. 

Anyway, those additional births will not change the main issues at stake when they start joining the labor force in the coming years. Further, mortality dropped during the last four decades, and life expectancy rose. The aging of the local population will be an increasingly delicate matter. When discussing the new economic compact for the next ten or twenty years, we would be well advised to factor in the demographics at play.

Data for November external trade is out. Cumulative figures up to that month provide us with a fair view on what to expect from the year, trade-wise. Whatever December brought will take another month to become known but is unlikely to change the 2021 picture significantly. On the face of the figures, one might be tempted to conclude that 2021 was a great recovery year. 

Remember that in 2020 overall exports had fallen by about 15 percent, compared to the previous and last ‘normal’ year. Even then, the contraction in exports was neatly less sharp than the overall economy shrinkage. 

If we pick the data for January-November this year and compare it with the results for the two previous years, the results are impressive. Total exports were up by 25 percent relative to 2020, and even above their level in 2019, by almost five percent. 

In the textile sector, which was once one of the pillars of the local economy, figures are striking. Clothing exports, which had only marginally contracted in 2010, were booming. They stood almost sixty percent over their level in 2019. Not only exports grew in absolute terms, but their share of total exports also rose significantly, roughly doubling since the pandemic started. 

These figures may not mean the sector renaissance but may point to a re-alignment of its role in the regional specialization in terms that the very different operating environment notwithstanding may be reminiscent of previous times.

However, one must also not forget that most exports are re-exports; that is, goods imported and then exported without domestic transformation. The local economy functions as an entrepot, as it were. Overall, domestic production has stood around 15 percent of total exports for the last years, giving or taking a couple percentage points. 

Although overall re-exports stagnated last year, some categories’ results could not be more expressive. Re-exports of watches and jewelry, for instance, were above their level in 2019 by about 45 percent and 54 percent, respectively. Not the most anticipated type, but some diversification, one might say.

But it is the imports figures that strike the most. Who would expect that products such as motor vehicles would be almost double their level in 2019? Or bags and beauty products imports would be almost going through the roof, nearly tripling or quadrupling, respectively? But that’s a matter for another time.

Many (and mostly external) factors influence the health of Macau’s economy. So, sound forecasts are hard to come by. In the last two years, that intrinsic uncertainty source was amplified by the pandemic dynamics, and the effects of the policies followed in its containment. Times like these we are living through make all prediction attempts even trickier. 

The year 2021 is now over. The coming couple of months will bring a significant amount of data to help us figure out the economy’s actual performance compared to what was hoped one year ago. As the first full-year figures start coming out – namely those for the all-important gambling sector – it is time to make some preliminary comments.

Everybody knows how bad 2020 was and how expectations ran high for 2021. Indeed, to make forecasts about 2021 in late 2020 was a task especially fraught with uncertainties for public and private agents alike. One of the most awaited indicators about the economy’s future direction was the amount of concession revenues inscribed in the Budget. Indeed, the government must always carry out some type of prognosis, if nothing else, to set tax collection expectations. 

In 2021 one could infer, in rough terms, that the best government estimates were putting casinos’ revenues somewhere around 125 to 130 billion patacas. However, the actual numbers came noticeably short. The year’s final figure was a tad below 87 billion patacas, that is, almost one-third less than anticipated, with a similar loss in public revenue. 

Full-year results were only marginally better than those recorded in 2020 and significantly worse than the previous years. Such an outcome will inevitably cause a sense of disappointment. The budgeted value for the current year is set at a similar level. In a way, if it is achieved, it will mean that the recovery, however modest, will arrive one year late, so to speak.  

In 2021, one underlying budgeting assumption was that connections to Hong Kong would start to normalize by the end of the first semester, as was already the case of China in some measure. That seems as far away now as in any time before. Several promised openings have been systematically derailed at the first sign of rising the number of infected, however small. Without changes on current containment policies in our primary sources of visitors and gamblers, expectations are inevitably guarded.

As the new year approaches fast, we are naturally somewhat impatient to start ‘closing the accounts’ of the current year. However, it is a (sad, some would say) a fact of life that our knowledge always runs somewhat behind the times. 

Our short-term analysis and expectations often depend on (hopefully) educated guesses. No matter how hard we try to reconcile observable, anecdotal evidence and hard statistics that will inevitably be dated to some degree when published.

Somewhere in between, if we may say so, lie the surveys made to the economic agents. These reflect the understanding and perceptions of those ‘living’ through the situations. At least in principle, they are the ablest to decipher the messages in the wind or identify the direction and strength of the waves. That is as close as we can get to having actual monitoring devices inside the economic engines.

It is an observable fact that the city has been livelier lately. Indeed, it is far from its most festive moments, which were even at times excessively so.  But certainly, also moving away from its most dispiriting times in the last couple of years. 

If initial expectations for this year had materialized, the second half of the year should have witnessed a robust recovery. Maybe it is coming rather belatedly.  Yet, last year, the second semester also brought a lot of promise that would fade fast in the early months of 2021. The number of visitors rose this second semester and appears to be steadying, which is good news for the many businesses in town that rely on their actual presence to thrive.  

However, data from the surveys made to hotels and restaurants in the third quarter suggest the recovery may still prove uneven. Those activities should provide fair signs of the underlying trends. For all the efforts to spare the labor market to the severe economic contraction, total staff in hotels, for example, is still ten percent below its level in the same period last year and 20 percent below the number the year before that. After substantial losses, demand for labor is rising, but so are unfulfilled jobs. Figures for restaurants are not so dramatic but follow a similar pattern.

Those figures suggest the recovery maybe be slower than hoped. Businesses are likely hiring with added caution, and the labor market may remain unbalanced, adding another obstacle to a swifter recovery.

Last month, the Statistics and Census Service (DSEC) published data on the economy that did not get as much attention as it probably deserved. We mean the ‘national’ accounts according to the Gross Added Value (GAV) contributed by the various economic sectors for 2020 – the year when it all started to unravel. 

Those figures provide a sort of X-Ray of the economy’s structure and, consequently, the various sectors’ relative weight in the creation of the local wealth. Some of the results are pretty striking, but none more so than the contribution of gambling to overall income in 2020: just 21 percent. It is a tremendous contrast with the same value in the previous year, 51 percent. In 2020, the share of the leading sector dropped to less than half of what it was before. 

That is the outcome measured in relative terms.  It is sort of ‘moderated’ by the fact that the economy itself contracted. In absolute figures, the sector GAV tanked to less than one-fifth its size in 2019. Alone, the sector losses represent three-quarters of the overall economic shrinkage in that year. The economy went down to slightly less than half the size it had the year before. Hotels and restaurants, significant bellwethers of the local economic health, also suffered substantial reductions in size by 80 percent and 54 percent, respectively.  

Almost all other sectors contracted in absolute size. However, three activities stand in stark contrast with the overall picture. Banks, public administration, and education rose against the tide in 2020. The latter two went up by small amounts, changes not much different from what one would expect in regular times; the former surged by an astonishing 15 percent. Banks were propelled with a two-digit growth rate while the economy was falling to less than half its size in 2019.

On the face of these figures, one might say that economic diversification was already in full motion. The top 5 sectors’ combined share dropped by about 15 percentage points.  Real estate kept the second position but doubled its share to almost 18 percent of the economy, and banks more than doubled it, rising to the third spot, with a 13 percent share.

Unfortunately, that is not necessarily good news. The apparent economic re-structuring is mainly the outcome of general impoverishment at variable sectoral rates, not the product of vigorous emerging activities. We’ll have to wait another year to find out what 2021 brings about.                                                                                                                                                                      

The changes relating to the operation of VIP rooms in casinos have been prominent in the news. They brought to the fore, once again, concerns about the consequences on employment. We can indeed expect that labour demand will be affected. Such effects will direct, resulting from the premises’ closure; and indirect, touching their service providers.

It may also affect other activities more remotely (if at all) related by changing the general expectations concerning the speed and extent of the economic recovery. Indeed, we will wait for future data on the labour market with increased apprehension. 

Labor data has shown in the past an inclination to display figures that would be unexpected, if not altogether surprising, in other economic geographies. Definitely, the front buffer provided by the non-resident workers operated practically as one would expect. Their number decreased continuously from their peak in the last quarter of 2019, when they were on the brink of reaching 200,000 persons.

Still, one might speculate that the contraction – around 12 per cent of their total – was smaller in relative terms than might be expected, given the seriousness of the contraction and the protection provided for the local labour force. After all, the economy has been running well below its potential for seven quarters. 

Perhaps more surprising is the almost absence of effect in total residents’ employment. The latest data (third quarter) indicates a loss of just about two thousand jobs compared with the same period two years ago – less than one per cent reduction. Even allowing for the rise in underemployment (small in absolute figures), the global effect on employment appears quite muted.

The salary data is equally perplexing. The overall median salary is currently precisely where it was at the end of 2018 and only marginally below the peak reached in 2019.  On the face of it, the crisis hardly touched the wages. Part of the effect may be a statistical artefact.

The most significant job losses were among the non-resident workers, so the share of locals (who benefit from a wage premium) in the labour force grew. But that alone cannot possibly explain such a modest impact.

Maybe the figures can be easily understood by those with access to more disaggregated data, and their explanations will be forthcoming. Meanwhile, before expecting too much from future numbers, we should try to grasp why the existing ones seem to show so little.

Macau Business | December 2021

It is not every day that a policy address and a piece of popular music become so entangled in your mind that they become the motive for an opinion piece such as this one. Lest the occasional reader may surmise someone is losing his bearings, this opening sentence needs further elaboration.

We all got used to listening to music in the background in many public places, usually a playlist running in a loop. One has then the opportunity to enjoy (if that is the case) the same tunes repeatedly – providing one stays long enough. Sometimes the music hovers almost at the threshold of our conscience, and we hardly notice it. There is even a specific name for that condition: wallpaper music. (As an aside: Christmas is coming, and we are bound to have the decibels go up, cheerfully encouraging our best seasonal consumer mood – if it was not for the inevitable fatigue. Is it possible that no one created a new Christmas hit for the last forty or fifty years?)

A few days ago, I was for a while exposed to a popular (a hit a few years hence) romantic song, presented in a (never encountered before) single tune loop. One could not miss it, sooner or later. The song’s main theme, several times repeated in the lyrics, goes as follows: “you say it best when you say nothing at all.” (Most of you have probably heard it at some point. The words have a romantic tint, I assure you. Even if taken in isolation, they might be open to more ambiguous and less benevolent interpretations.) And it just kept coming again and again to my variably conscious attention.

Even the most benevolent reader may start wondering where this all leads; what’s the connection with the Policy Address? The fact is, the refrain line kept popping to mind as I was reading the document. As it happens, the brain follows surprising paths sometimes and may establish unexpected connections.

Remember this is the last Policy Address before the end of the current gambling concessions, which will be winding up in a few months. Given the weight and role of the sector in the economic growth and social changes it entailed in the last two decades, one might expect the matter would be a central one, if not the central one, in the Address. Yet, it says very little of real substance about it. 

The principal stated objective for the sector comes at the bottom of page 28 (section III.2, Portuguese version) in very general terms: “To promote the orderly and healthy development of the gambling industry, in accordance with the law.” But, unfortunately, this does not clarify much. (Let us leave aside this old inclination to multiply adjectives. No one, we can bet, would expect or wish the development to be disorderly, unhealthy, or illegal.)

The new law proposal is yet to be presented to and approved by the Legislative Assembly. Nevertheless, the hints from the public discussion, or public statements and events in connection with the sector, all point to increased direct control over the industry – more direct intervention of the government in the management of the future concessions, more assertive protectionism for local concerns, and an enhanced command over financial flows, to name the most obvious. 

As the lyrics that so obsessively hang in the back of my mind for a while (not anymore, I reassure you) may remind us, the most important is often what is missing, or not explicitly said, if at all. 

By October or so of last year, news surfaced of an impending revision of China’s criminal laws concerning gambling and, especially, its promotion in mainland China.

The changes being discussed then at the National People’s Congress concerned the marketing of activities described at times as cross-border or, at other times, as overseas. Finally, in March of the current year, the law came into effect, effectively criminalizing those activities.

Then, one of the questions popping up in the media and public arguments concerned the place of Macau in that frame. What did those words imply? Would the law also apply to Macau, or only to foreign places like the Philippines, Cambodia, or Australia? Such a question will seem strangely irrelevant now, regardless of the law’s original purpose.

First, the main targets of the law, the junket operators, often operate both in Macau and abroad. Targeting the latter activities without touching the former world be, in any circumstance, an almost impossible task in practical terms, should it even be considered. Second, the events of the last few days made the question pointless.

Three shots killed the business in its present form. One: there was a court ruling confirming that casino concessionaires could also be liable for the actions of the junkets operating in their premises. The presumed wall neatly separating casinos from the activities carried out by the vast network radiating from the junket concerns just fell. The associated business risk increased noticeably.  

Two: the highly visible arrest of the head of a leading junket operator sent shockwaves through the sector. After all, the activity was legal in Macau, and the junkets were (duly, one presumes) registered with the authorities. 

Three: the sector’s regulator requested junkets stop providing credit to their customers. The cornerstone of the trade, responsible for so much of the revenues generated over two decades, got a direct hit.

Feeling the headwinds, the casino operators started rescinding their agreements with the junket companies, effectively signing the death certificate of the existing business model. 

If we wanted to close with a cliché (always to be avoided, as stylebooks of many media around the world will tell), we might say the last days have brought a tsunami to the gambling sector of Macau. Its impact in terms of casino revenues, tax income, and employment, to name only the most obvious, is yet to be gauged. Anyhow, in its wake nothing will be left standing as before. 

The leading indicators for the Macau hotel industry include, obviously, the number of guests and their duration of stay. The sector has grown enormously in the last 20 years, especially at the top of the hotel classification rankings.

(We leave lower-ranking units in these comments, as they are of less significance for our purposes here.)

The total number of hotels jumped from 68, in 2020, to 122 in 2019. Five-star hotels make the bulk of offerings in number and size. In that period, their number rose four-fold; they represent roughly two-thirds of the total number of units and rooms. 

The pandemic-related travel restrictions have inevitably put a lot of stress on the industry. The so-called staycations have targeted locals, trying to compensate somehow for the lack of visitors. Packages specifically designed for residents short in alternatives and with presumably attractive prices were to make up for the absence of international guests. 

The evaluation of their outcome has not been made so far, to my best knowledge. The results were surely positive. At least, we can conjecture, the alternative – no visitors, no locals – would be worse. But it is also possible that results fell short of expectations. 

There is less novelty to that practice than may meet the eye of the less attentive. One of the interesting (a much more ambiguous word in English, I’m told, than in my native Portuguese) features of Macau’s hotel occupation rates is the weight locals have always had in it. 

For instance, in 2008 and 2019, they represented around 5 per cent of the total number of hotel guests, a percentage that would rise by a couple of percentage points if we only considered five-star hotels.

Those figures put local guests in the third ranking spot, only behind mainland China and Hong Kong. Their average duration of stay in those two years mainly remained between four and five nights, well ahead of the main ‘competitors.’

In 2020, with all the travel restrictions in place, the total of local guests was only marginally over the previous year and almost 20 per cent below the 2018 figure.  Against all odds, their duration of stay dropped to less than half what it used to be, sitting even below those recorded for the guest coming from the other main sources.  

That raises interesting questions about the mood and expectations of the locals in these difficult times. 

There was a measure of heightened expectation about the publication of the Gross Domestic Product figures for the third quarter of the year. As many will remember, after a calamitous drop following the outburst of the pandemic, the economy seemed to start picking up at a relatively fast pace in the second semester of 2020.

Notably, compared to each of the previous quarters, the economy rose in the last two quarters of that year by 12 percent and 58 percent, respectively. 

If the trend observed then had stood, we might expect some sort of normalization by the end of this year. Even a comparatively modest average quarter-on-quarter growth might provide a return to a kind of normalcy. However, the recovery stalled in the first semester of the current year. That fact naturally raised interrogations about the signals that the third quarter might provide. 

The latest figures are not such that one might start celebrating. The upward economic trend seen earlier stopped at about half the size the GDP level had before the slump. If anything, the third quarter confirms that the recovery has halted. Moreover, if we take as reference the figure for the last quarter of 2020, the overall trend is even pointing slightly downward. 

That trend reversal is also visible in the figures for private consumption, the component that is of most immediate interest for the general welfare of the residents. Indeed, consumption of services seems to stand mow back at values like those seen before the crisis.

But both the consumption of food and beverages, on the side, and all types of consumer goods, durable and non-durable, on the other side, are trending down again. In the absence of any renewed dynamics on the investment side, private demand is unlikely to provide any sustained impetus for the recovery. 

On a short-term timeframe, the weakened private demand might be compensated, up to a point, by increased public activity. But neither public consumption nor public investment shows the impetus to make a noticeable difference. Although they typically rise by the last semester – the execution of the public budget obliges – such rise is unlikely to change the overall mood.

With the economy closed for the foreseeable horizon to all sources of visitors except mainland China and the level of uncertainties raised by the overall approach to Covid prevention, it is certainly too soon to plan for the celebration. 

Hengqin Island (or, in its Portuguese rendering, Ilha da Montanha) has long been a focus of interest in the debates about the future of the Macau economy. For decades, two main issues hovered above any reflection on the future of this enclave economy.

One was the overreliance on gambling; the other was the lack of physical space to sustain meaningful urban and economic growth. 

Indeed, the diversification obstacles go beyond the local geography alone, but the latter raises obvious difficulties. It was seen for a long time as an essential drawback that needed to be tackled. Part of the answer was reclamation, and the results are there for us to see.  

But in the nineties, there was speculation that the mainland might cede Hengqin island to Macau after the handover, allowing the city a significant increase in its area of jurisdiction. That never materialized. 

Then, more than ten years ago, news came of plans to develop the western section of Zhuhai, including Hengqin. Such plans were meant, among other things, to accommodate residents from Macau and support, in some way, the expansion of Macau’s population and economy. However, the account of its protracted and successively delayed implementation is yet to be made.

Nowadays, the involvement of Macau in Hengqin occupies the center of the political discourse and priorities, something the current economic crisis seems only to have accentuated.

Hengqin looks like the central hope and thrust for Macau’s economic diversification and the liberation from its gambling addiction (forgive the pun). What that can mean in practice, as the island is not actually under the administration of Macau, is still in the works.

But the central role assigned to Hengqin changes the terms of the debate on diversification and the role of gambling in the local economy. So often, the issues of diversification and casinos’ role in the local economy are set in rather alternative, if not antagonistic terms.

That was possibly never justified, not an adequate framing of the issue. Under the current circumstances, it may become even less so. 

The Hengqin reframes the diversification debate and the role of casinos in the local economy. However, if the aim is the fast integration of the regional economy, the over-specialization of Macau need not be an issue. On the contrary, the commitment to Hengqin development, if it is to be sustained and long-term, may link the issues in novel ways and even reinforce their complementarity. 

Last week, the Legislative Assembly rapidly approved another alteration to the current year’s budget. It was a straightforward change. Essentially, it amounted to an additional contribution from the financial reserve to support the set of new actions aiming to counter the effects of the economic depression. 

Contrary to what happened in the previous budget alteration in April, no other changes were introduced. Then, the estimate for current income was reduced slightly reduced compared to the initial forecast. That was the outcome of mainly the revised and lower figures for revenues from direct and indirect taxes collection. (Remember, our main source of income, gambling concessions revenue, had already been almost halved in the initial budget compared to the previous year.) 

As a result, the additional contribution by the financial reserve to the budget was raised in April by an amount exceeding MOP9 billion. The recent alteration increases that contribution by an additional MOP2.3 billion, roughly equivalent to 2.5 per cent of the total initial budget.

These alterations notwithstanding, the execution of the budget in the first three quarters suggests gambling-related revenue will still fall short of the expectations. Income from gambling concessions was trailing by September, with an execution rate of less than 55 per cent. On current trends, the budget may reach the end of the year with a shortage equivalent to more than one-fourth of the initial value. 

Given its weight on total government income, that shortage will inevitably affect the final balance. 

It is a significant dent in the revenue expectations, in both absolute and relative terms. Effective current revenue stood at about two-thirds of the amount budgeted by the end of September (total budget figures for October are not yet available). That was certainly better than in 2020 but noticeably lower than before. 

Certain types of capital revenue show better than expected inflows. Namely, the sale of buildings, shares, and similar financial assets, whose figures were not initially budgeted. But their unexpected contribution to the public coffers stood in September at MOP30 million patacas, well below anything that would make a noticeable effect on the overall picture. 

On the expenditure side, capital expenses are much below the initial expectations, with execution rates under fifty per cent of the budgeted figure. On the positive side, if we may say so, it lightens the burden of the budget balance; but it is undoubtedly turning against expectations and the economic recovery.

“All times are made of change, always taking on new qualities.” So said the prince of Portuguese poets some five hundred years ago (freely translated here), when the globalized world started to take shape. The transition may be smooth, almost unnoticeable, or irrupt fast and rough, even painfully for many. It can crack reasonable expectations and upend long-held certainties on short notice. 

And insecurities have indeed spread these last couple of years. In the first 20 years post-handover, leaving aside the occasional and short-lived hiccup, Macau has ridden the big wave created by the gambling boom. The sky was the limit, so people believed – or behaved as if they did. No more. Doubts and missed opportunities keep piling up, feeding each other. Almost everyone looks less assured now.

Indeed, Covid struck unexpectedly, and its rampage was utterly unforeseeable.  That alone would be enough to disrupt the best-laid plans and bury plenty of hopes. Yet, some 20 months into the pandemic crisis, it is almost as unclear as ever how we will manage the transition to a world where the virus has become endemic – no horizon, no defined path, no plausible timetable. It increasingly feels like we are going through a long and painful goodbye, an inescapable crash agonizingly watched in slow-motion. 

No matter how well it may have served in the past, the more the extant approach lasts, the more it looks untenable. We would be wrong to discount people’s resilience. But it would be foolish to take it for granted. An uncertainty that draws out confidence and hope lingers on.

Then, the gambling concessions, bread-and-butter providers for so many and so long, are coming to an end in less than one year. At the best of times, any negotiations, if not just aiming to renovate the existing concessions, could open several cans – if not of the proverbial worms, at least of long-repressed desires and claims. Even ignoring other complicating factors, the current economic conditions alone make it challenging to carry sensible negotiations.  What calculations, expectations, or plans can one hold on to under such doubtful conditions? 

On a brighter note, one might argue that the potential gains of the activity are – and have proven to be – so attractive that many operators would be willing to risk their hand at the table anyway (if that is desirable is another matter). But no one will deny that these are far from ideal conditions to discuss and set the future course of our flagship industry. 

Not to be undone, the international framework has also become more unstable. Regional tensions are rising in more than one spot, and the world trade system is shaken. Supply chains under stress, economic activity disruptions, inflation pressures, you name it, are coalescing into what we might politely define as challenging times for social stability and welfare. 

With the occasional military threat lurking, international political strains are building up in the region and away. It all presages cracks in the global economic system and raises the potential for social and political disruption. 

Indeed, as much as change is a constant, so is continuity in many ways. Nothing keeps the same forever or is ever built from naught (other than the Big Bang, that is). Continuity and change both are hallmarks of human endeavors. The hard part, in times like these, is to tell those two apart. As we face tough choices in uncertain waters, we may feel we have to cope with more than our fair share of unknowns. But, paraphrasing Camões again, the most perplexing, possibly, is that things do not seem to change the way they used to happen anymore.

Seen from Macau, the world may often seem a faraway place. In less troubled days than these, even the world just across the Gong Bei checkpoint may seem remote at times. 

Occasionally, however, we are forced to realize this is not the typical enclave economy it once was anymore. Macau is much more tightly knitted to the neighbouring region than a superficial observation might suggest. Indeed, contrary to some relatively widespread perceptions, the integration of Macau in the adjacent region fabric has started long ago, drawn by Guangdong’s integration and growth. 

For the provision of the basic conveniences of life, we are today very much part of the regional economy. So when something goes wrong there, we are bound to take note. Some people may remember that years ago, there were problems with excessive water salinity in the region. Macau, even then, was comparatively spared the worst of the effects, at least measured against what was being endured nearby. 

Across the border, if memory is true, there was a feeling we were getting special treatment. If that was the case is beyond the purpose here to ascertain. The point is that many started to realize that Macau was changing and was not anymore so ‘independent’ – if it ever wholly was – from the events shaping the daily lives of our neighbours and from their goodwill. 

It is public that many regions in China are today facing an energy production crisis. In several provinces, shortages have led to disruptions to the daily routines of ordinary people and production interruptions. As a result, economic growth expectations are revised downwards, and the possibility of supply problems affecting various sectors is high. Re-establishing the normalcy of operations in such a critical sector will take time, and negative impacts on other sectors’ performance are inevitable. 

Any additional adverse effect on the general economic welfare of the mainland economy, such as this one, is bound to delay the economic recovery of Macau further. Indeed, we could well do without power cuts. But nowadays, the local production facilities are mainly pashed out, and almost all our energy comes from Guangdong.  

We cannot dismiss the possibility we may face similar problems shortly; it is better to be prepared. What is the likelihood of that happening? May the power supply be rationed? Which contingency plans are in place, what measures are under consideration?  Some frank and plain words from the authorities would be reassuring

It is fair to assume that no public policies, no matter how meaningful or well-intentioned they may be, will ever satisfy everyone. Policies that do not elicit reactions, approval or disapproval, are probably irrelevant, if not meaningless.

Conversely, the more policies touch on critical aspects of people’s lives, and the more those affected will be likely to react. Also, the more we can expect the policies’ results and effects to be complex and, accordingly, harder to judge. 

No policies are more difficult to evaluate than those touching directly on critical aspects of people’s livelihoods, when not on matters of life and death. But even those cannot be exempt from a critical evaluation carried, as much as possible, with warm hearts and cold heads. We can be sure that no policy will fail to have pros and cons and touch different people in multiple ways. 

In the colder language of the economists’ trade, they will always come with benefits and costs, which will be distributed unevenly in society. That is, they inevitably raise questions of both efficiency and equity. Now, no matter how difficult they intrinsically are, those issues must not be avoided one way or the other, and usually, we should face them sooner rather than later.  

Health policies are certainly among the most difficult ones to deal with. They will likely entail a complex and broad gamut of perceptions and feelings on those affected, which means all of us in most cases.

But whether we like it or not, no policies, even those about which we strongly believe, can be immune (no pun intended) to an assessment of the material and emotional gains and losses associated with them, both short- and long-term.

Besides, all policies, like all strategies, one of the big fashionable words of our times, can avoid a continuous re-assessment based on the careful observation of their real-world implementation. None is so perfect or represents such an absolute and fixed truth that cannot be questioned and re-evaluated under the changing circumstances within which we all have to navigate through the days, months, and years.   

Reality is a changeable but stubborn thing. The longer we ignore it, the likelier it will bite us harder at the next opportunity. In another cliché of the times, it is often said that there is no economy without people. That is undeniably true. It is no less true that there are no people without an economy.

Like many tourist destinations, Macau has its highs and lows. Typically, we have five high periods each year: the Chinese New Year, the Labor Day, the summer holiday, the National Day, and the Christmas and New Year period. Four of them have passed, and none has failed to dismay. For all the expectations that each raised, their outcomes fell short. 

Expectations for the remainder of the year are now possibly so low that whatever comes cannot bring disappointment. Absent a clear path and timetable to start a sustainable recovery, many companies may fall into a sort of slow-motion torpor, or worse.

In this mostly gloomy environment, the government announced a new set of measures to help small end medium companies. The latest actions are, in essence, the same as taken last year.

Alone, that is not wrong. But their reinstatement implicitly recognizes the previous round was insufficient. Worse, their repetition in almost the same terms may suggest a shortage of new ideas or that we are running out of munitions. 

The government press release states that these measures were formulated after a “broad’ study. Unfortunately, no specific information or conclusions from that study are available. It would be appropriate to provide a widely accessible and detailed assessment of last year’s actions’ extent and measurable outcomes.

The first three and the sixth measures listed are mainly an extension of what was done before. They concern interest rate subsidies, interest-free loans, extended reimbursement periods, and a three-month exemption from rents for users of public premises.

Then, the release mentions mostly unspecified incentives for the financial sector and property owners to facilitate life for their borrowers or tenants. Other than some tax adjustments yet to be defined in the latter case, it is not clear from the presented information what these incentives might mean. 

The last measure concerns granting additional subsidies for companies without profits last year or workers with low income. It is also a reiteration of what was done before. 

Pending further details and the budget alteration they will entail, not much more can be said. Again, some observed figures from the previous run would be welcome. Under the circumstances, we may venture they will possibly provide a little breathing space for some but are unlikely to be saviours for most. The display of closed shops in town may continue to attest to that.

Macau Business | October 2021 

By José I. Duarte | Economist, Macau Business Senior Analyst

The realm of public policies is a complex one. No matter how much consensus there is about a specific problem, setting up and executing a suitable policy or set of policies is a process full of uncertainties and pitfalls. Not infrequently, policy measures that appeared to be highly consistent and garnered broad support may fail to achieve the expected results when not proven inadequate or even counterproductive. 

This is a well-known feature of the real world for those familiar with the theory and practice of public policies. It applies regardless of the specific social and economic topic being addressed by a government at any moment.  The execution of all plans will have to deal with the real world with real people, with its foibles and unknowns that no mental model will ever fully match in its complexity. 

Of course, one need not go as far as Napoleon, a master of strategy if there was one, who is supposed (doubtfully, but that is another matter) to have said: “On s’engage, et puis on voit” (roughly, you get into the fray, and then you see). Except under the most dramatic circumstances, public policies cannot just amount to jumping into the matters and trying to find some way out (although, mind you, sometimes they do.)

So, recognizing real-world complexity is not detrimental to the use of analytic models or strategies. Without them, we would navigate blindly in the world. We must attempt to design and assess measures and actions as carefully as feasible. But we should also be acutely aware of the limitations of any model, strategy, or approach associated with any policy path we select. 

On the other hand, neither should one get stuck on a particular course of action, no matter how useful or successful it looks at any juncture. We must adjust as the situation develops and more information becomes available, or it may well become inadequate when people adapt, and behaviours change. Thus, setting up monitoring and correction mechanisms is as critical, if not sometimes more, than getting a first policy approach right.

Also, we should avoid, if the mental leap is forgiven here, what is usually called the “sunken cost fallacy.” Or, to use a more down-to-earth expression, “throwing good money after bad.” Just because a lot was spent in a particular approach does not justify alone that we should keep investing in it.

Mr John M. Keynes was one of the most influential economists of the 20th century, and in many ways still is. As a high representative of the British government, he was also deeply involved in the institutional setup that defines much of the world’s political and economic architecture.  Not surprisingly, many people who may have never heard of him, much less read anything he has written, will have heard about Keynesianism and its influence on the modern contemporary economic debates and policies.  

Being a working economist and policymaker, as it were, he was very much aware of the damage that unforeseen (and, often, unforeseeable) events and changing circumstances might inflict on the best-laid plans and strategies. But, then, as he pointedly said, often “the difficulty lies not so much in developing new ideas as in escaping from old ones.”

Among the many quotes attributed (again, doubtfully) to him, one stands as possibly quite pertinent for our times. As the story goes, someone was pointing out that he was saying, on a particular subject, something not quite precisely as he had declared before. To which Keynes would have replied: “when circumstances change, I change my opinion. What do you do, Sir”? Indeed, what should we do?

Macau was coming out from the last Covid scare. Hardly one month had passed since the previous one, and the script was re-run. After a few positive tests, the city again virtually stopped for mass testing and, increasingly, mass quarantining.

Other health services were inevitably affected, as before, and the economy suffered another blow. Quality of services, commercial or otherwise, is visibly shaken. A new round is in the cards, and morale appears to be plummeting.

We seem fated to endure a stop-and-go regime without an end on sight. The slump has been running for 20 months, but the horizon line is not yet visible. To keep going, we must indeed rely on the operationality of services.

But they have yet to be thoroughly tested. It is not clear what preparations were put into place to deal with a severe outbreak, should it happen, God forbid. Vaccination proceeds too slowly, and we seem utterly complacent. It looks like only changing outside circumstances will modify this situation. 

We must also rely on luck and the financial reserve – none is unlimited. One is capricious. We may go for an extended period of slow agony before events show whether the approach is feasible in the longer term. The other is a measured quantity and cannot sustain a regular economic operation forever or prevent significant income loss for various population segments. 

A few numbers will help grasp the sting’s extent. From the beginning of the crisis until now, our primary source of income and attraction reached a total revenue of slightly over MOP106 billion.

That is less than in 2008, the first year to break past the MOP100 billion number. This year, the worst of the crisis behind, the first nine months generated less than one-third the amount in the same period in 2019. 

We can make similar observations about visitors. Theirs is a critical figure for hotels, restaurants, and most retail businesses. This year, the average monthly number of visitors hangs below six hundred thousand people. In 2019, in the same period, it was over three million. Closed doors and reduced operating hours attest to the seriousness of the crunch. 

We may end up being the last place trying to shield itself completely inside a bubble to keep Covid away. But that determination does not come without costs. It is time we measure the resulting sacrifices, both in other health-related matters and general livelihoods.

As we enter the last quarter of this year, it is fitting to take stock of what economic indicators tell us and gauge from them where we are heading. 

Let us remember the year started on promising notes. The public budget itself revenue forecasts were comparatively optimistic and presumed an increasingly open economy. Its figures implied some normalization of the visitor flows between Macau and mainland China and Hong Kong, its primary sources of visitors and income – if not full normalization, at least a clear trend in that direction. 

In the first months, authorities suggested that much, almost taking for granted the improvement of the situation and close to normal operations in the main holiday periods, around the Chinese New Year and the Labor Day celebration. But, unfortunately, although those two periods were indeed livelier than what we have been getting used to, both fell short of the expectations and failed to provide the needed momentum for a sustained take-off. 

The biggest disappointment, however, was still to come. Over the years, August has been one of the best months for tourism, only overtaken by December. It was, so far, the worst of the current year. Cumulative numbers up to August stand at less than one-fifth of their value in 2019. It may lose that unfortunate crown to September.

Gambling revenues were another prominent victim of the pandemic and ensuing lockdowns. They are also trailing well behind expectations. In 2019, they had already, of course for other reasons, displayed a slow downward trend. Then came February 2020. If we take the cumulative figures for every month, total revenues were in the red for 27 months in a row.  The revenue pickup experienced in the second quarter of this year may now be compromised. Total revenues for the first eight months are below one-third of the same period in 2019.  

More worryingly, under the current pandemic-related procedures, there can be no end in sight for this state of affairs. The point where we might hope that the virus would disappear, as it was the lucky outcome in the SARS outbreak, is past. The virus suddenly disappearing or being eradicated in the short term, if ever, is becoming more unlikely by the day. The prolongation of the current situation is bound to destroy the present economy without a viable replacement in place or even the possibility of another economic model taking root.

As mentioned in this column on previous occasions, the crisis and its aftermath have brought forward numbers on economic activity that are surprising at times. Uncommon times are likely to provide unusual figures, for sure. But some may run against expectations or what conventional wisdom and previous experience might suggest. Consumption activities are an indicator of welfare and correlated with overall activity and income. 

In times of economic predicament, they are expected to contract and will often keep shy until there are clear signs of recovery and general economic and family budgets regain confidence. In that frame, some of the results coming out on the domestic trade are somewhat puzzling and would deserve additional scrutiny and analysis. 

For added context, remember that according to national accounts published for the first two quarters, private consumption has almost recovered to pre-pandemic levels; even has the economy, as measured by its top indicators, is still significantly depressed. There is an element of surprise in that, indeed, one that is reinforced by more detailed data on retail sales becoming available. Let us look briefly at some of them.

In 2020, data indicate retail sales dropped by more than 40 percent compared with the previous year. The severity of the contraction in 2020 and the virtual disappearance of external customers make such a drop even seem on the mild side.  But the apparent recovery in the first half of this year is equally, if not more, surprising.

In the first quarter, total retail sales were just 9 percent below the level in the same period in 2019; and the second-quarter figure was even 15 percent above the equivalent figure in that year and on par with its highest values ever. However, as seen above, domestic demand is still below previous levels; and the economy is being slow to take off, as most of its most significant indicators emphasize. 

Some of the most vibrant sales are indeed those mainly associated with visitors’ expenditure profiles. To pick some of the most obvious, leather goods, watches and jewelry, and phones all recorded sales more than 50 percent above their pre-pandemic levels. As visitors’ numbers keep persistently well below those seen before, these figures suggest remarkable changes in purchasing behavior. Yet, the driving forces behind such a ‘spending spree’ remain essentially unexplained. Where such buying exuberance comes from, it is not obvious. But that’s just another riddle posed by these challenging times.

The survey for the Gaming sector in 2020 is out. It provides numbers that confirm the trends we got from other sources and contains some intriguing figures also. By this account, most indicators suffer badly, while a few prove surprisingly resilient. 

Let us see the first case, the battered numbers. Major items such as Gaming Receipts, and by extension, Gross Value Added (GAV) and Gross Surplus, all fell to a fifth or less than what they were in the previous year.

Almost half of the gaming machines were deactivated, and many will remember the empty casino rooms with most dealers sitting alone at their tables. If we take the average monthly revenues, it is as if the year had finished by mid-March.  Is that as close to a free fall as one might imagine in any business, short of immediate bankruptcy? The metaphor might be tempting.  

However, by contrast, and quite unexpectedly, the total number of full-time staff declined by just about 1600 people, representing a less than 3 per cent decline.  Given the severity of the income crunch, the number is indeed unexpectedly low.

Total employment compensation declined a bit faster; still, the average workers’ compensation dropped by just ten per cent. On the face of such numbers, it appears the sector’s staff crossed the disaster zone almost unscathed. 

These figures fit hardly with the anecdotal evidence about the impact on the labour market, which can only add to the perplexity elicited by them. Be it the non-resident workers that were dismissed or not allowed to return to Macau (which amounts to the same, for practical purposes); or the chatter about people forcibly moved to part-time schedules (and incomes) or sent home on unpaid leave. 

Expenses other than employees’ compensation also tumbled but, as might be expected, not as fast as receipts. There are high fixed costs that are, as it were, less elastic than receipts. The expenditure item that contracted the less was the capital formation, but this is hardly good news.

Its value was already on a downward trend well before the crisis and is unlikely to pick up significantly until the uncertainties hanging over the economy start to dissipate. 

The contrasting numbers above suggest that one of the following (if not both) may be happening. The quirks of this very special economy go well beyond the usual suspects, or the survey methods and categories may need review.  

2020 年第二季度的經濟表現是大多數澳門居民記憶中少有的寒冬——比所有人的想像都要糟糕。城市經濟直至2020年下半年才開始回溫，公衆對今年經濟寄予厚望。然而，2021年首季的城市生產總值數據尚未能令人放下心頭大石。一如預期，人們對第二季度的表現充滿了期盼。 

文：José I. Duarte | 經濟學家、澳門商業雜誌高級分析師

從表面上看，數據或許令人鼓舞。按年同比的結果更令人滿心歡喜。然而，首季確定的負面要素仍然存在，前景不如我們預期的那麼樂觀。正如澳門統計暨普查局多次發表新聞稿表明，我們以去年同期錄得的低值作爲參考基準，與最新錄得的結果作比較。無論如何，澳門經濟在2020年萎縮過半，第二季度成爲表現最糟糕的時期。 

這座城市繼而幾乎陷入了停滯，同期比較必然創造的增幅驚人。整體而言，我們必須謹慎地對待這些數字。個別看來，我們幾乎無法根據這些數據作出清晰的評估。 

若只看今年上半年錄得的數據，城市生產總值仍僅略高於 2019 年水平的 50%，無論以任何標準衡量，這仍然是嚇人的蕭條。 

旅客消費作爲推動經濟前進的主要動力，仍較之前的水平相去甚遠——僅略高於 2019 年結果的40%。當中的主要組成部分，即博彩活動支出，低於上一“正常”年度上半年的三分之一。今年曇花一現的升勢未能創造我們急需的牽引力，自然也就沒有跡象表明穩定復甦。最近數月的經濟表現起落不定，未有形成穩定的潛在趨勢。過去數年的私人投資同樣持續下降，在前景變得更清晰之前不太可能回升。 

從好的方面來看，居民消費大部分已恢復，表明消費激勵措施的總體預期和積極影響有所改善。此外，政府支出亦有所增加。這些跡象為人們樂觀的願景提供了理據。但假若經濟不確定性持續存在，這種樂觀情緒或將無法繼續下去。 

事實上，非本地勞工群體的承受力靈活性和金融儲備的規模形成了地區經濟緩衝，衍生了不少彈性。但，這些彈性也將隨著時間的推移，出現磨損。對未來的信心雖然至關重要，但若然對經濟的承受能力不甚瞭解的話，就無法長久地保持下去。 

無論如何，內部需求日益增加至接近疫情前水平，我們仍然必須牢記：内需通常只佔經濟的一半左右。 另一半依然未見蹤影。賭牌期限即將屆滿的事實增加了更多不確定性。政府對此繼續保持神秘。迄今爲止，立法會委員會就此最新發表的報告是否有助於驅散前路的重重迷霧？仍屬未知。 

此外，無新增感染案例的方式也帶來了一定的不確定性。特區政府的防疫政策在對抗疫情的首階段取得了出色成績，但看起來越來越不可持續。隨著病毒演變成地方性流行病，加上疫苗接種覆蓋率的失敗局面持續，我們就更加有必要重新評估現行方式的成本和風險——從人類、經濟及健康方面出發。 

It is not uncommon that the effects of economic contractions take some time to be visible. That happens both with measures of economic activity, such as the Gross Domestic Product, and with other related indicators such as, for example, employment levels or retail sales. After all, statistics take time to collect and process. 

After the pounding in the first half of last year, the economy recovered a bit but is roughly about half the size it used to be. The current economic trough has been going on for more than a year, and its effects should be visible in many other indicators. But, surprisingly, that does not seem to be the case in some unexpected instances.

Figures for overall employment and unemployment seem relatively immune to the ravage one would expect from a contraction of such magnitude. As more detailed data becomes available, some measure of bewilderment is not going away. Let us take a couple of examples from surveys made twice a year on some select economic sectors. 

In the case of casinos, surveys take place in June and December. Last June, the employment losses reported amounted to less than 1,500 workers, less than four percent of the labor force. The drop for full-time employees was marginally smaller, affecting just a tiny fraction of the entire staff. Moreover, according to the published figures, changes relating to working statuses other than full-time were barely significant. Yet, for the first eight months of this year, this is an activity that operated at less than one-third the level it reached before the pandemic. 

Also, could we expect retail trade, which boomed with the influx of visitors, to lose less than 2,5 percent of its full-time staff? Indeed, the sector relies on both internal and external demand. According to GDP data, the former has recovered most of the lost ground, but it is still some ten percent below the 2019 figures. And the number of visitors dropped precipitously. The first half of this year saw less than a fifth of them, in the same period.

Similar observations could be made about other critical or sensitive sectors. With different levels of measurable impact, at least as seen from the perspective of these surveys, the results are still surprising in one way or the other. We still must get plausible and testable hypotheses to determine if and why it is so.

Macau Business | September 2021 

By José I. Duarte | Economist, Macau Business Senior Analyst

For the Macau economy, the second quarter of 2020 was the most brutal one most can remember – and certainly worse than anyone might have imagined.

The economy started to pick up a bit in the second half of that year, and great expectations grew about the much-desired recovery this year. The Gross Domestic Product figures for the first quarter were not entirely reassuring. As might be anticipated, the GDP figures for the second quarter were eagerly expected.

On a superficial approach, numbers may look encouraging. Year-on-year comparisons are inevitably flattering. Yet, the reasons for concern identified in the first quarter persist, and the outlook is less optimistic than we might hope. As the press release from DSEC points out in several instances, we compare the latest results with a very low base in the same period last year. After all, this economy had more than halved in 2020, and the second quarter was its worst period.

Then, the city came to a virtual standstill. Same-period comparisons are bound to provide startling growth rates. Those figures must be used with care, if at all. Alone, they carry little information of relevance for a clear-headed assessment of where we stand.

If we take the figures for the first half of this year, GDP is still, in nominal terms, only marginally above the 50 per cent of the 2019 level. By any standard, that is still a striking depression. 

Expenditure by visitors, the main driver for the economy, is still very far from the previous figures – just a tad over 40 per cent of the 2019 results. Gaming expenditure, its main component, was still below one-third of the similar figure in the first half of the last ‘normal’ year. The occasional improvements seen in a couple of moments this year failed to provide the much-needed traction, and there is certainly no hint yet of a steady recovery. These months have been characterized mainly by ups and downs, with no steady underlying trend. Private investment has also been declining over the last few years and is unlikely to pick up until the horizon line becomes clearer.

On the brighter side, private consumption has mostly recovered, suggesting an improvement in the general expectations and positive effects of the consumption incentives. Moreover, government expenditure is also rising. These features provide grounds for some optimism. But such optimism may not be sustained if the uncertainty about the economy endures. 

Indeed, there is a good deal of resilience provided by the region’s economic buffers, namely the flexibility afforded by the non-resident labour force and the size of the financial reserve. But even those will wear out over time. Confidence in the future, critical as it is, cannot be maintained forever without some idea about the bearing of the economy.  

Anyway, as internal demand approaches pre-pandemic levels, we still must bear in mind that it typically amounts to just about half of the economy. The other half is still missing. Adding to the uncertainty, the end of the gambling concessions is approaching. There are many unknowns about the government plans on that matter.  It is not clear that the recent report from a Legislative Assembly commission on the subject helped to dissipate the fog surrounding it.  

Further, the Covid no-cases approach adds to the uncertainties. The policy, which served the city well in the first phases of the epidemic, is looking increasingly unsustainable. As the virus becomes endemic and the egregious failure in vaccination coverage persists, there is a rising need to re-evaluate the costs (and risks) of the current approach – in human, economic, and (also) health terms.