Macau casino sector drags down entire economy
Declines in Macau’s casino industry are starting to show all across the city. According to the Director of the Statistics and Census Service (DSEC), real exports of gaming services, their measure of the casino sector’s contribution to gross domestic product (GDP) is down 0.6% year over year.
As a result, the entire administrative district is feeling the pain. Real GDP is now 3.2% smaller year over year, marking the first time in four years that this measure has shrank.
Although tourism has frequently been reported to be up, causing the city to consider wild ideas like a tourist tax to help citizens cope with the increased stress on existing infrastructure, that tourism doesn’t seem to be helping GDP either. Tourism services, a measure of tourist impact with the casino sector’s numbers removed, showed a 0.3% drop in GDP as well.
As a result of all this decreased money in the city, investment is reported to be down 32.1% as well in the first quarter. “Total demand weakened due to feeble growth, leading to increased downward pressure on the economy,” the report read.
This mostly isn’t a surprise to anyone who’s been paying attention to Macau this year. The casino industry in Macau is taking a significant hit as a result of the U.S. trade war with China. That has impacted Chinese VIPs, largely manufacturing elites who depend on lines of credit that have now dried up. Without their patronage, Macau is hurting.
What is surprising is that the significant increases in tourism, which Macau has touted as their safety net for the current lack of VIPs, hasn’t helped more. The city is packed with tourists at any given time, but these mass market visitors are apparently not contributing nearly enough to the economy to make up for the VIPs who can’t afford to spend as much as they used to.
Analysts looking at this situation are unlikely to predict any change in sight for the industry. U.S. President Donald Trump has only ratcheted up the trade war recently, doubling tariffs in May, forcing China to retaliate and increase tensions even further.
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