Macau could face multi billion dollar deficit
Macau could face a deficit of $5.99 billion in 2020, according to the University of Macau Chair Professor in Accounting and Finance Jean Chen.
Calvin Ayre reports that her assessment matches one previously provided by Secretary for Economy and Finance Lei Wai Nong last week.
This, of course, is due to decreases in revenue at casino concessionaires, who have already seen sharp declines in gross gaming revenues.
To alleviate the economic impact of this downturn, it’s expected the government will have to step up and support struggling businesses.
In a statement provided by the economist, she explained:
“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.”
Secretary Lei has already been taking steps to try to assist the local economy.
In January, before the full impact of Covid-19 was felt, he ordered that the annual check by brought forward into April to help Macau recover from the impact of the outbreak.
Each permanent resident would receive a check in the amount of $1250, while non-permanent residents will receive $750.
This was expected to cost the government an estimated $887.5 million.
Resort-casinos have been facing putrid revenues through the first two months of this year.
In January, revenues saw a modest decline, but they bottomed out in February, as gaming revenue dropped by 87.8 per cent as compared to the same month in 2019.
This was due in large part to a 15-day mandatory shutdown of all casino operations.
Now financial experts are expecting that as the epidemic continues, it will drive revenues even further down.
One financial expert noted that the tourism and service focused regions, such as MICE, catering, retail, tourism, casino, taxi, and real estate, have been affected most by the outbreak, as they have seen a drop in revenues of between 60 and 95 per cent.
“Around 35,000 small and medium enterprises, which account for more than 95 per cent of the firms in Macau are very much related to the service industry, and thus have been suffering badly during this very difficult time,” Professor Chen pointed out.
Right now, the government is focused on trying to assist local residents during this time.
They have announced several financial support measures including providing MOP 2.2 billion in individual consumers vouchers, tax breaks and reductions, plus credit guarantees for SME bank loans.
Macau tax revenues in decline
Macau tax revenues have sharply declined as a result of the coronavirus’ impact on the casino sector, but Secretary for Economy and Finance Lei Wai Nong said the government is not considering any tax breaks for the industry.
Calvin Ayre reports that as part of his statement, the secretary indicated that local revenue earned from taxes on casino operations through the first two months of this year fell to a record deficit exceeding $4.9 billion.
This shortfall was a direct result of the casino concessionaires having little to no business, due to Covid-19.
The local government recorded a tax surplus of $6.42 billion in 2019, with $10.26 billion in expenses and $16.61 billion in revenue.
Gaming taxes contributed the largest share of this total at $14.08 billion.
Those numbers look like a dream now, as the coronavirus led to a 15-day shutdown of casino operations during February.
January, which already brought some virus-related volume declines, saw gross gaming revenue drop by 11.3 per cent in comparison to the same time in 2019.
Overall, gaming revenue reached $2.76 billion with the government collecting tax revenues of $1.1 billion.
Those were gaudy numbers compared to February, however when total revenue fell by 87.8 per cent from February 2019.
That gave total revenue of $390 million with gaming tax revenues reaching negligible numbers.
Lei noted that the government still has no plans to relieve its tax burden on operators.
“For now, we do not intend to introduce any tax changes.”
Lei is the official responsible for direct oversight of the casino industry.
He explained that the only way that tax breaks would occur is after a thorough review of Macau’s gaming laws.