2020 was supposed to be a banner year for Macau. The city would improve its gaming revenue while, at the same time, diligently working on a diversification plan that would help it become more of a global tourism hub for all types of visitors, not just gamblers. Chief executive Ho Iat Seng, who only just started to get used to his new surroundings after taking over in December, would help spearhead the transition that would ultimately take Macau into an entirely different direction. COVID-19 had different plans, though, and the city has had to spend most of its time conducting damage control to keep the ship from sinking. It’s already clear that 2020 is not going to be the year anyone expected, and Macau can only do what it can to stay afloat, hoping that 2021 is different. With the city anticipating a 50% drop in gross gaming revenue (GGR) through the end of the year, the road to recovery is going to be long, and that decrease is going to cause a huge deficit in the amount of taxes collected.
With casinos only seeing half of the revenue they anticipated, the amount of tax revenue they deliver would be reduced by an equal amount. Macau’s government has acknowledged the mathematical certainty, updating its budget for fiscal year 2020 to reflect that the gaming industry will only be able to supply around $6.26 billion, of which around $5.7 billion will come directly from the industry’s GGR.
Junket operators are only forecast to be able to provide around $26.2 million on the taxes they pay on commissions earned. This is about 41.7% lower than the original forecast, but not as bad as the hit the city will take to its urban development projects. That amount went from $649 million to $324.7 million for a decrease of right at 50%.
The economic impact caused by COVID-19 on the city is already being felt. Tax revenue for the city was a little more than $2.3 billion in the first quarter of this year, which was 37.6% lower than the same period in 2019. The second quarter isn’t expected to be any better, since the GGR and tax revenue reports customarily follow well after the tax has been collected. This means that the figures most likely don’t represent any of the lack of activity from March, when casinos were just starting to try to regain their footing.
A new idea being proposed between Macau and Hong Kong may help to ease the financial pressure and allow businesses in the region to bounce back perhaps a little sooner than they may have anticipated. Hong Kong and Macau may establish a program that would allow both cities to allow free travel between them without the necessity of the quarantine protocols that are currently mandated. The idea was put forward by Lam Ching Choi, a doctor who sits on Hong Kong’s Executive Council, citing the lack of new cases in the region as justification for the program. The idea would have to be approved by regulators of both cities, as well as health officials, before it could be implemented.
