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Department of Economics of University of Macau Announced
Macroeconomic Forecast for Macao 2011
The Department of Economics of the University of Macau released its Macroeconomic Forecast
for Macao 2011 today (March 4). Amid the global recovery, Macao’s economy has reverted to a
positive trend of growth since the second half of 2009. The momentum of growth accelerates in
2010. With low bases of comparison in the first and second quarters of 2009, Macao’s real GDP
recorded 17.2% and 31.5% year-on-year in the first and second quarters of 2010 respectively. In
the third quarter of 2010, Macao’s real GDP continued its immense growth with 27.1%
year-on-year and recorded 52.1 billion MOP (Figure 1 and 2).
Figure 1: Gross Domestic Product
(Billion of 2008 MOP)
60
50
40
30
20
10
0
2010q3
2010q2
2010q1
2009q4
2009q3
2009q2
2009q1
2008q4
2008q3
2008q2
2008q1
2007q4
2007q3
2007q2
2007q1
2006q4
2006q3
2006q2
2006q1
2005q4
2005q3
2005q2
2005q1
Figure 2: Gross Domestic Product
(Year-on-Year Growth (%))
40
30
20
10
0
2010q3
2010q2
2010q1
2009q4
2009q3
2009q2
2009q1
2008q4
2008q3
2008q2
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2007q4
2007q3
2007q2
2007q1
2006q4
2006q3
2006q2
2006q1
-10
-20
Similar to the first and second quarters of 2010, the growth of economy was mainly supported by
strong growth in gaming and tourism sectors. Exports of services rose substantially to a recorded
high level. Improvement in domestic demand continued to reflect on the steady growth in private
consumption. However, total investment kept on contracting amid slowly revival of large
construction projects. The exports of goods continued to shrink. In tandem with the improvement
in service exports and local consumption, both imports of goods and services grew rapidly.
Inflation began to accelerate. Labour market was stable with unemployment rate and median
monthly earnings varied little over quarter.
The Economy in 2010
The following highlights the economic situations of different sectors in the third quarter of 2010:

External demand of services was pushed up by the economic recovery in Macao’s major
markets --- Mainland China and Hong Kong. As these two economies grew quickly, the
visitors from these markets were eager to spend in Macao and particularly the gaming
activities. In the third quarter of 2010, the exports of services were 54.2 billion MOP, rose
by 41.6% year-on-year. Meanwhile, the exports of services in gaming were 45.1 billion
MOP, increased by 45.4% year-on-year.

The decline of Macao’s exports of goods continued. In the third quarter of 2010, the exports
of goods contracted by 13.2% year-on-year to 1.6 billion MOP. The export of textile
products and other non-textile goods went down 13.5% and 12.8% year-on-year
respectively.

In tandem with the improvement in service exports and local demand, imports of goods and
services rebounded significantly. For the third quarter of 2010, the imports of goods rose by
9.9% year-on-year to 12.3 billion MOP and imports of services increased by 33.6%
year-on-year to 14.9 billion MOP respectively.

Local consumer confidence continued to get better. Private consumption expenditure was
12.4 billion MOP, rose by 7.5% year-on-year in the third quarter of 2010. The household
final consumption expenditure in domestic market increased by 4.8% and the expenditure
abroad increased remarkably by 24.7% respectively in that period.

The recovery of business investment was very slow. The gross fixed capital formation
continued to shrink by 11.6% year-on-year in the third quarter of 2010 to 4.1 billion MOP,
decelerated from the 38.4% decline year-on-year in the second quarter of 2010. Upon slow
recovery of major casino and hotel constructions, total private gross fixed capital formation
contracted by 18.7% year-on-year in the third quarter of 2010 with construction investment
contracted by 26.3% while equipment investment rebounded and increased 9.8%
year-on-year respectively.

Inflation began to accelerate amid higher local demand with increased import prices. The
Composite Consumer Price Index on December 2010 rose by 3.9% year-on-year. For the
two largest components of the Composite Consumer Price Index, food and non-alcoholic
beverages, and housing and fuel, their year-on-year growth rates were 4.8% and 2.5%
respectively. For the aggregate economy, the GDP price deflator increased by 3.3%
year-on-year in the third quarter of 2010.

Labour market has been stable since the beginning of 2010. Unemployment rate for the
third quarter of 2010 was 2.9%, up by 0.1 percentage points from the second quarter of
2010 and at the same level of the first quarter of 2010. Excluding the non-resident workers,
the unemployment rate for local workers was 3.5%, up by 0.1 percentage points from the
second quarter of 2010.

The total employment was 320.2 thousand in the third quarter of 2010, up by 1.4%
year-on-year even though fewer non-resident workers were employed. Analyzed by
industry, employment in manufacturing was 14.6 thousands, down by 9.3% year-on-year
reflecting the sharpened decline in the exports of goods. Employment in construction was
27.5 thousands, dropped by 9.8% year-on-year in tandem with the deterioration of the
investment in construction. Employment in gaming industry was 64.2 thousands, up by
6.1% year-on-year, amid the recovery of the gaming sector.

Median monthly earnings were 9,000 MOP in the third quarter of 2010, up by 5.9%
year-on-year. For the gaming sector which accounted for the largest share of the employed
population, median monthly earnings were 13,000 MOP, up by 8.3% year-on-year. The
median monthly earnings for the other major industries such as hotels & restaurants
increased by 7.7% year-on-year to 7,000 MOP while the median monthly earning for
wholesales & retails has been 7,500 MOP, up by 7.1% year-on-year.
Latest Forecast for 2011
With remarkable growth in its major markets of service exports and a low base of comparison in
the first half of 2009, Macao’s GDP recorded an impressive growth rate of 25.3% in the
first-three quarters of 2010. The low base of comparison may not happen again in 2011, but the
momentum of growth of Macao economy is expected to go on. According to the IMF forecasts
on January 2011, the global economy is expected to expand 4.4% in 2011. U.S. GDP is expected
to expand 3.0% and the Euro Area is likely to expand 1.5%. For Mainland China, under the
massive stimulus package aimed at lifting the domestic demand, the economy reverted faster
than expected as GDP grew by 10.3% in 2010. However, aiming to control accelerated inflation,
the Central Government began to tighten the money supply and impose various measures on
housing market. The economic growth may slow down as a result. This will also affect another
major market of Macao’s service exports, Hong Kong, to have a more measurable growth in
2011. Under this circumstance, Macao’s GDP is expected to grow by 15.7%, with ranged from a
pessimistic 9.3% to an optimistic 22.2% in 2011, according to the Macroeconometric Structural
Model of Macao.
Macao’s service exports, in particular, the gaming sector, grew extraordinarily in the first-three
quarters of 2010. With a more measurable growth in the major markets, the exports of services
are expected to grow 21.0% in 2011. The decline of exports of goods is also expected to
decelerate in 2011 with annual rate of 8.0%. Concomitant with the recovery in the total exports
and domestic demand in 2011, the imports of goods and services are expected to grow by 8.6%
and 21.0% respectively in 2011.
For the domestic demand, private consumption spending grew by 7.0% year-on-year in the
first-three quarters of 2010 and is expected to grow 4.0% in 2011. Investment continued to
shrink at 33.9% in the first-three quarters of 2010. However, as the casino and hotel owners have
committed to restart their suspended construction projects, the overall growth rate of investment
is forecast to rebound at a rate of 10.7% in 2011.
Inflation, as measured by the change in the Composite Consumer Price Index, was 2.8% in 2010
and is expected to rise higher to 4.6% in 2011 with a strong demand from local residents and
foreign visitors and higher imported prices. For the aggregate economy, the GDP price deflator is
forecast to increase 4.5% in 2011.
The labour market is expected to be stable. Unemployment rate was 2.8% in 2010 and is forecast
to be 2.6% in 2011. Excluded the non-resident workers, the unemployment rate of local residents
was 3.5% in 2010 and is expected to be 3.2% in 2011. Median monthly earnings increased 2.6%
in 2010 and are forecast to rise by 4.0% in 2011.
About the Macroeconometric Structural Model of Macao
The Macroeconometric Structural Model of Macao is a quarterly simultaneous-equations
econometric model which currently includes 93 equations and 257 variables covering seven
blocks of the Macao economy --- consumption, investment, external sector, prices, government,
labour market, and monetary sector. Time series data used starts from 1998 first quarter and is
updated once new data are available. Its results provide the community a timely understanding
on the state of the Macao economy and facilitate the decision-makers to make prudent choices
for the future.
Being one of the key research area, the Macroeconometric Structural Model of Macao is based
on research led by Professor Sir James Mirrlees, conducted by the Department of Economics,
and is sponsored by the University of Macau.
Table: Forecasts of Major Economic Variables
Level
Gross Domestic Product (Billion of 2008 MOP)
Private Consumption Expenditure (Billion of 2008 MOP)
Gross Fixed Capital Formation (Billion of 2008 MOP)
Exports of Goods (Billion of 2008 MOP)
Exports of Services (Billion of 2008 MOP)
Imports of Goods (Billion of 2008 MOP)
Imports of Services (Billion of 2008 MOP)
GDP Deflator (2008 = 100)
CPI (Composite) (April 2008 - March 2009 = 100)
Median Monthly Earnings (MOP)
Employment (Thousand Persons)
2006
2007
2008
2009
2010
2011
(Actual) (Actual) (Actual) (Actual) (Forecast) (Forecast)
137.0
157.2
161.6
164.1
202.8
234.7
38.0
41.9
44.2
45.2
48.1
50.0
47.6
59.0
50.3
34.0
27.0
29.8
21.4
21.5
16.0
7.7
6.8
6.3
94.7
122.0
140.4
146.1
210.4
254.7
51.0
61.8
56.8
43.1
47.5
51.6
28.1
40.4
47.9
41.9
58.4
70.7
82.8
90.1
100.1
100.8
104.7
109.5
87.4
92.3
100.2
101.4
104.3
109.1
6,659
7,772
8,175
8,650
8,875
9,234
265.1
300.4
322.8
317.4
320.3
336.3
Table (Continued) : Forecasts of Major Economic Variables
Year-on-Year Growth Rate (%)
Gross Domestic Product
Private Consumption Expenditure
Gross Fixed Capital Formation
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
2006
2007
2008
2009 2010Q1-Q3
2010
2011
(Actual) (Actual) (Actual) (Actual) (Actual)
(Forecast) (Forecast)
22.1
9.3
14.4
14.7
2.8
1.5
25.3
23.6
15.7
25.1
22.2
5.6
0.8
6.3
10.3
5.7
2.3
7.0
6.3
4.0
6.9
7.3
-23.9
-2.8
42.1
24.0
-14.8
-32.3
-33.9
-20.8
10.7
-17.7
24.1
Exports of Goods
Exports of Services
Imports of Goods
Imports of Services
GDP Deflator Growth Rate
CPI (Composite) Inflation Rate
Median Monthly Earnings
Unemployment Rate
Unemployment Rate
(Local Residents)
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
Lower
Baseline
Upper
2.8
0.5
-25.4
-52.0
-11.2
15.0
28.8
15.1
4.1
50.8
16.1
21.3
-8.1
-24.1
9.1
19.9
43.9
18.6
-12.6
43.7
7.7
8.8
11.0
0.8
3.6
5.1
5.6
8.6
1.2
2.4
15.4
16.7
5.2
5.8
3.5
3.8
3.1
3.0
3.6
2.9
4.4
3.7
3.8
4.4
3.5
-12.5
-11.3
-10.0
42.7
44.0
45.3
8.9
10.2
11.6
37.2
39.4
41.7
3.4
3.9
4.3
2.7
2.8
2.9
2.0
2.6
3.2
2.7
2.8
2.8
3.3
3.4
3.4
-13.8
-8.0
-2.2
14.6
21.0
27.4
2.4
8.6
14.8
11.7
21.0
30.3
2.3
4.5
6.7
3.5
4.6
5.7
0.9
4.0
7.1
2.3
2.6
2.9
2.8
3.2
3.6