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International Monetary Fund. Asia and Pacific Dept

On behalf of the Macao SAR authorities, we would like to thank staff of the Article IV team for the constructive discussions during the mission, as well as their professional and comprehensive assessment. The Macao SAR authorities appreciate this consultation with the Fund, which has been the third for Macao SAR since 2014. We broadly agree with staff’s assessment of the economic outlook and welcome staff’s recognition of the authorities’ efforts in enhancing growth resilience of Macao SAR through diversification. We are pleased to confirm the authorities

International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation highlights that while more moderate than in the past, gaming and tourism revenue in Macao Special Administrative Region picked up as the economy returned to expansion since mid-2016. Progress with diversification towards mass-gaming and nongaming tourism, together with the continued China gaming monopoly, are expected to deliver growth of around 4 percent in the medium term. Risks are tilted to the downside, mainly emanating from Mainland China. Prudent macroeconomic policies and high reserves provide strong buffers against shocks. In addition to supporting diversification, fulfilling social needs, and maintaining macroeconomic stability, the policies priorities explained in the report will reduce external imbalances. The report also discusses that the current housing macroprudential stance and related fiscal measures appear broadly appropriate. A broader set of policies are advised to support housing affordability, where continued efforts to boost housing supply will be key.
International Monetary Fund. Asia and Pacific Dept
International Monetary Fund. Asia and Pacific Dept

2019 Article IV Consultation Discussions-Press Release; Staff Report; and Statement by the Executive Director for Macao SAR

International Monetary Fund. Asia and Pacific Dept

2019 Article IV Consultation Discussions-Press Release; Staff Report; and Statement by the Executive Director for Macao SAR

International Monetary Fund. Asia and Pacific Dept

On behalf of the Macao SAR authorities, I would like to thank staff of the Article IV team for the candid and constructive dialogue held during the mission, and their thoughtful assessment and advice. The Macao SAR authorities appreciate this consultation with the Fund, which has been the first for Macao SAR since its establishment in December 1999. I broadly agree with staff’s assessment of the economic outlook and macroeconomic policies, and endorse staff’s recommendation to place Macao SAR on a 24-month Article IV cycle. I am pleased to confirm the

International Monetary Fund. Asia and Pacific Dept
KEY MESSAGES Setting. Discussions took place for the first time since the handover of Macao SAR from Portugal to China in 1999. Prudent macroeconomic management has underpinned rapid development in the territory, which is now the world’s largest gaming center. As a small, open and tourism-dependent economy, Macao SAR is currently also benefiting from loose global monetary conditions and a Mainland-related boom. Outlook and risks. Growth should stay strong over the next few years at 8–10 percent buoyed by gaming exports and investment, with inflation remaining around 5–5½ percent. However, the economy is vulnerable to external shocks, in particular a slowdown in tourism, due to shocks in the Mainland or Hong Kong SAR or other setbacks to the global recovery. The buoyant property market could also correct if demand fundamentals shift or interest rates rise abruptly with the withdrawal of unconventional monetary policy abroad. Macroeconomic policies. The policy stance is appropriate, with scope for further tightening of macroprudential policies should property prices continue to rise sharply. If downside risks materialize, targeted fiscal stimulus should be used to buttress growth. In the event of a severe property downturn, some countervailing measures could be cautiously unwound. The currency board is the best arrangement for Macao SAR. Financial stability. Important progress has been made in strengthening financial stability in line with the 2011 FSAP recommendations. Prudential measures should focus on managing potential credit and liquidity risks from a gaming slowdown and the property sector, as well as spillovers from shocks in the Mainland and Hong Kong SAR. Longer term challenges. Looking further ahead, Macao SAR’s public finances face a moderation in gaming revenues juxtaposed against spending needs from population aging. A sovereign wealth fund to manage part of the territory’s fiscal reserves and medium-term budgeting could therefore be useful. As the gaming sector matures, economic diversification toward other services will be key for stable growth.
International Monetary Fund. Asia and Pacific Dept

in Macao SAR 179 Sources; Haver Analytics; Macao SAR authorities; and IMF staff estimates. 1/ Data of 2015, figures are in thousands. Labor Market Strength : The sustained structural improvement and cyclical resilience of the labor market reflect the following structural factors. Nature of Labor Demand —The key employing sectors (gaming, hotels, restaurants) are resistant to automation or outsourcing. They are also relatively moderate in skill requirements which eases ability to absorb new entrants. The gaming boom has therefore

International Monetary Fund. Asia and Pacific Dept
This 2016 Article IV Consultation highlights that the real output for Macao Special Administrative Region (SAR) is expected to contract for a third consecutive year in 2016. However, external demand has begun to recover with gaming revenues posting six consecutive months of positive annual growth. In 2017, a low base will help increase growth above 2 percent despite continued weak domestic demand. Further out, Macao SAR is well-positioned to record sustainable growth in the mid-single digits. In addition to its still highly valuable gaming monopoly within China, Macao SAR is an established tourist destination with significant geographic proximity to Mainland China. Macao SAR is now also investing aggressively in non-gaming tourism and financial services.