External headwinds offset domestic strengths

Country Rating BB2


  • High income market. Macao is ranked among the top ten markets in terms of GDP per capita
  • Strong financial buffers with robust government position and large FX reserves
  • Solid banking system
  • Low level of unemployment


  • Economy highly dependent on the tourism  and gaming industries
  • Vulnerability to external shocks particularly measures implemented in China
  • Poor infrastructure compared to other high income markets



Economic Overview

A cyclical upturn 

The economy is recovering after three years of contraction. Real GDP decreased by -24% between 2013 and 2016 with a collapse of tourism receipts and the decline of the gaming activity which account for nearly 62% of total output. In 2017, the outlook improved on the back of rising external demand especially from China. GDP growth is estimated at +8.0%. 
While the recovery is positive news, it may be too early to declare victory. Real output in 2017 is estimated -18% below its 2013’s level and private investment is still weak.

Looking ahead, economic activity is projected to expand but at a slower pace (+4%). Mainland China’s demand growth is set to slow as authorities tighten credit conditions. Domestic demand will provide some cushion. A strong labor market, contained inflation and a more active government strategy to diversify the economy away from gaming will provide some impetus to growth. This includes strong public investment in non-gaming tourism and financial services.

Risks remain elevated. These stem from a strong concentration of economic activity on the gaming industry, heavy dependence on demand from Mainland China, and a faster than anticipated normalization of the US policy rate.

Macro-policies are underpinned by strong fundamentals

Public finances are generally sound with zero public debt and fiscal reserves that amount to 95% of GDP. The fiscal surplus is large (6.6% GDP estimated in 2017) even though it is on a decreasing trend. This is due to lower gaming revenues, a looser fiscal stance in 2013-16, and a more aggressive fiscal policy to diversify the economy from 2017 onwards.

The financial system is strong. The currency board is credible with foreign reserves accounting for nearly 100% of pataca M2.  The banking sector is solid. Banks, often foreign owned, have sound fundamentals and benefit from large liquidity reserves enabling easy access to credit.

The external position is broadly sound. Macao is a net foreign creditor with a net foreign asset position around 280% GDP. The current account balance is sizeable with a double digit surplus. Pockets of risks stem from the unbalanced structure of the goods and services exports. Once more, dependence on China, tourism and the gaming industry are key issues.


Last review: 2017-14-12