HONG KONG (Reuters) – The leader of Macau said the enclave risks slipping into a budget deficit if gambling revenues in the world’s biggest gambling hub drop below 15 billion patacas ($1.88 billion) a month after they fell short of government forecasts in the first quarter.Chief Executive Sam Hou Fai made the comments on Tuesday to local legislators, according to a government statement.
“If subsequent gaming revenues still do not meet the target, the Government will face a budget deficit,” he said, according to the statement.
Macau is a special administrative region of China and is the only place where Chinese citizens are legally allowed to gamble in casinos.
A Portuguese colony until 1999, its economy is heavily reliant on its casino industry which contributes about 80% of the government’s tax revenues.
“The imbalance in our fiscal structure is serious and we must maintain a strong sense of crisis awareness. Macau is a small city, yet our regular expenditure is substantial and it will continue to grow unless we face up to extreme circumstances,” he said, according to public broadcaster TDM.
A slow down in economic growth both in China and globally are key concerns for Macau’s casinos, especially given a flurry of U.S. announcements to impose import tariffs globally, including on China, analysts said.
DS Kim, an analyst at JP Morgan in Hong Kong, said Macau faces “second-order impacts” from the expected slowdown in orders for nearby Guangdong, China’s largest export hub, and a weaker yuan.
He now anticipates a potential worst case 10% decline in gaming revenues for Macau versus a low single-digit growth forecast.
Macau’s first-quarter gaming revenue rose 0.6% year-on-year to 57.7 billion patacas, or 19.2 billion patacas per month, versus the government’s full-year forecast of 240 billion patacas, or 20 billion patacas per month.
Authorities in Beijing and Macau have mandated that the six licensed casino operators Sands China, Wynn Macau, SJM Holdings, MGM China, Galaxy Entertainment and Melco Resorts diversify their revenue base away from the casino industry.
($1 = 7.99 patacas)
(Reporting by Farah Master: Editing by Neil Fullick)
