Macau To Struggle Big Deficit In 2020 As Revenues Continue To Drop

Macau may have a deficit of MOP48 billion ($5.99 billion) in 2020. According to Jean Chen, the University of Macau Chair Professor in Accounting and Finance, such a scenario is quite possible. Her evaluation matches the one provided by Secretary for Economy and Finance Lei Wai Nong somewhat earlier.

The reason, naturally, lies…

…in the fact that revenues at casino concessionaires saw a dramatic drop aggravated by the already sharp declines in gross gaming revenues (GGR). To lessen the negative economic impact of this slowdown, it’s expected the government will offer help and take certain measures to support struggling businesses.

Jean Chen clarified in her statement:

“This kind of dramatic change due to unexpected emergency is not necessarily leading to a long-term drop in revenue. A temporary deficit is normal for any country suffering from some dramatic events […] A careful cost-benefit analysis is necessary rather than one single indicator.”

In his turn, Secretary Lei has already made efforts aiming to contribute to the economic situation at the local level. Following his January order, both permanent and non-permanent residents of Macau are entitled to the annual check, which will be delivered in April to alleviate the impact of the Covid-19 outbreak.

It’s estimated, this measure is going to cost the government around $887.5 million as each permanent resident can count on a check worth $1,250 while non-permanent residents can expect $750.

During the first two months of 2020…

…casino resorts have encountered various difficulties with really low revenues being the major problem. After showing a pretty modest decline in January, gaming revenues drastically reduced in February, mainly due to a 15-day shutdown that was obligatory for all casino operators. The second month of the year saw an 87.8% drop as compared to the same period in 2019.

As things stand now, the majority of financial experts do not believe that the situation can get any better providing the continuation of the epidemic. Moreover, they expect a further decrease in revenues not only for casinos and within the entertainment industry but also in all sectors focused on tourism and related services.

Professor Chen added:

“Around 35,000 SMEs [small-and-medium enterprises] which account for more than 95 percent of the firms in Macau are very much related to the service industry, and thus have been suffering badly during this very difficult time.“

The good thing is, the government is determined to provide assistance to local residents and make every effort to find appropriate solutions. A number of financial support steps intended to cost MOP2.2 billion have already been announced, with individual consumer vouchers, tax breaks and reductions, as well as credit guarantees for SME bank loans among them.

Source: Miral, Ad. “Macau to face huge 2020 deficit as GGR falls off a cliff“. Calvin Ayre. March 10, 2020.