Macau enters recession as gaming contributions fall
A 0.8% fall in gaming services exports helped to push Macau into a technical recession in the second quarter of 2019, new figures from the gambling enclave’s Statistics and Census Service have revealed.
Macau’s GDP fell by 1.8% in the three months through to the end of June to mark the second consecutive quarter of contraction following a 3.2% decline in the first quarter of 2019.
A 30% slump in construction investment year-on-year and a 24.4% fall in the value of exports, as well as a 6.1% fall in domestic demand, also contributed towards the latest figures.
However, the 0.8% drop in gaming services exports – the contribution of visiting gamblers to Macau’s GDP – was higher than the 0.6% fall registered in the first quarter.
According to figures released in July by Macau’s Gaming Inspection and Coordination Bureau, gross revenue from different gaming activities fell from MOP76.37bn (£7.70bn/€8.52bn/$9.46bn) to MOP73.56bn quarter-on-quarter in the three months until the end of June.
Macau’s casino industry is facing a number of challenges, especially in terms of attracting and retaining VIP gamblers.
Having for years been viewed as an automatic destination of choice for punters in the region, the proliferation of state-of-the-art casinos in neighbouring countries has in recent years has given punters more options than ever before.
According to a study released earlier this year by Union Gaming, Macau lost $1.4bn of VIP gross gaming revenue (GGR) last year to Cambodia, the Philippines, South Korea and Vietnam, with the total expected to rise to $2.6bn this year.
With an effective tax rate of 39% on VIP GGR, Macau has also lost high-rollers to other markets that offer better returns to junkets, with South Korea offering a 20% tax on VIP GGR, the Philippines offering 15% and Vietnam offering approximately 14%, when commissions are deducted from the statutory rate of 35%.
It also remains to be seen whether broad estimates of a 2-4% GGR headwind in Macau in 2019 due to the introduction of a smoking ban in public places such as casinos at the start of this year were overly optimistic.