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IMF Country Report No. 19/123

PEOPLE’S REPUBLIC OF CHINA—MACAO SPECIAL ADMINISTRATIVE REGION

2019 ARTICLE IV CONSULTATION DISCUSSIONS—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MACAO SAR

May 2019

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2019 Article IV consultation with the People’s Republic of China—Macao Special Administrative Region, the following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its April 24, 2019 consideration of the staff report that concluded the Article IV consultation with Macao SAR.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 24, 2019, following discussions that ended on February 25, 2019, with officials of Macao SAR on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 5, 2019.

  • An Informational Annex prepared by the IMF staff.

  • A Statement by the Executive Director for Macao SAR.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623–7430 • Fax: (202) 623–7201

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2019 International Monetary Fund

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PEOPLE’S REPUBLIC OF CHINA—MACAO SPECIAL ADMINISTRATIVE REGION

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION DISCUSSIONS

April 5, 2019

Key Issues

Context. Macao SAR is the largest casino center in the world and gaming tourism drives its growth. While more moderate than in the past, gaming and tourism revenue picked up as the economy returned to expansion since mid-2016. Growth then moderated in the second half of 2018, including due to spillovers from the Mainland’s deleveraging effort and U.S.-China trade tensions. Diversification efforts continue as gaming activities still amount to almost half of GDP.

Outlook and risks. Progress with diversification towards mass-gaming and non-gaming 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.

Policies. There are three top policy priorities.

  • First, higher public investment and further targeted social spending—including education spending to boost human capital—would support the diversification agenda and foster inclusion.

  • Second, a medium/long-term fiscal framework would facilitate efficient use of gaming-dependent fiscal resources.

  • Third, the exchange rate peg continues to serve Macao SAR well and should be maintained, including via prudent fiscal policy, and maintaining a sound financial sector and adequate reserves.

In addition to supporting diversification, fulfilling social needs, and maintaining macroeconomic stability, these policy priorities will reduce external imbalances.

Approved By

James Daniel (APD) and Edward R. Gemayel (SPR)

Discussions took place in Macao SAR and Hong Kong SAR between February 13 and 25, 2019. The team comprised M. Colacelli (head, APD), S. Ando (STA), and J. Zhang (APD). K. Chen (LEG) supported the team remotely. The mission met with the Secretary for Economy and Finance, the Chairman of the Monetary Authority of Macao, other senior officials, representatives from the banking sector, gaming and construction industries, and academics. G. Alvim (APD) assisted the mission.

Contents

  • CONTEXT AND RECENT DEVELOPMENTS

  • OUTLOOK AND RISKS

  • FISCAL POLICY

  • A. Medium/Long-Term Fiscal Framework Including the Sovereign Wealth Fund

  • B. Near-Term Fiscal Policy

  • FINANCIAL SECTOR POLICIES AND HOUSING

  • A. Housing

  • DIVERSIFYING SOURCES OF GROWTH

  • EXTERNAL SECTOR STABILITY

  • STAFF APPRAISAL

  • BOXES

  • 1. Junket Finance in Macao SAR

  • 2. Universal Cash Transfers: Wealth Partaking Scheme

  • FIGURES

  • 1. Real Sector

  • 2. External Position

  • 3. Banking Sector Developments

  • 4. Fiscal Outlook

  • TABLES

  • 1. Selected Economic and Financial Indicators

  • 2. Medium-Term Macroeconomic Framework

  • 3a. General Government Accounts (million MOP)

  • 3b. General Government Accounts (percent of GDP)

  • 4. Balance of Payments

  • 5. Indicators of External Vulnerability

  • 6. Financial Soundness Indicators

  • ANNEXES

  • I. Risk Assessment Matrix

  • II. Medium and Long-Term Fiscal Framework and Sovereign Wealth Fund: Some Case Studies

  • III. Inequality: Trends and Drivers

  • IV. External Sector Debt Sustainability Analysis

  • V. Real Estate Market in Macao SAR: Overvaluation, Policies, and Affordability

  • VI. External Sector Assessment

  • VII. Key 2011 FSAP Recommendations

  • VIII. Main Recommendations of the 2016 Article IV Consultation Discussions

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PEOPLE’S REPUBLIC OF CHINA—MACAO SPECIAL ADMINISTRATIVE REGION

STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION DISCUSSIONS—INFORMATIONAL ANNEX

April 5, 2019

Prepared By

Asia and Pacific Department (in consultation with other departments)

Contents

  • FUND RELATIONS

  • STATISTICAL ISSUES

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Press Release No. 19/153

FOR IMMEDIATE RELEASE

May 9, 2019

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