IMF praises Macau diversification attempts

Praising the local government’s attempts to diversify the economy “toward an economic model with less volatile and more sustainable sources of income,” the IMF preliminary report concluded that the city’s “medium-term outlook remains strong” and that it is “well positioned to have stable and sustainable growth in the low- to mid-single digits.”

According to a statement from the Monetary Authority of Macau (AMCM), the IMF Mission “welcomed the SAR government’s plan, based on the ‘Five-Year Development Plan’, to set up a ‘sovereign wealth fund’ […] for enhancing its fiscal reserve management.”

The team, which was researching in Macau between November 3 and 14, was led by Geoff Gottlieb, who in turn conducted various meetings with senior government officials, the AMCM, private sector representatives and academics.

“The Macau SAR economy has started an important transition. Developments in mainland China have triggered a large and likely permanent reduction in external demand from high-net worth visitors,” wrote Gottlieb in a statement issued after concluding his team’s visit.

“Fortunately, policy choices taken during the boom have allowed Macau SAR to enter this transition from a position of strength: large fiscal buffers, a liquid and well-capitalized banking sector, and a credible nominal anchor in the exchange rate peg. Going forward, the challenge will be to deploy these strengths in a way that maximizes support for both steady, inclusive long-term growth,” he added in the statement.

The IMF analysts also emphasized the importance of the pataca’s peg to the Hong Kong dollar – as aforementioned terming it a “credible nominal anchor.” The report stated that the success of the peg has been supported by a “steady application of the necessary supportive policies by the authorities including adequate foreign exchange coverage.”