Macau Central Bank Statement

Author: | Published: 19 Oct 2018
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Underpinned by strengthening external demand, the economy of the Macao Special Administrative Region (MSAR) experienced a distinct recovery in 2017, after contraction for three consecutive years from 2014 to 2016. Real GDP rose 9.1% in 2017, coupled with a favourable employment environment and a high degree of price stability. The unemployment rate stayed low, at 2.0%, while consumer-price inflation slowed to 1.2%. In the first quarter of 2018, the economy maintained its momentum, recording a real GDP growth of 9.2%, thanks to robust external demand and private consumption.

Evidenced by a sustainable improvement in economic conditions, the credit ratings of the MSAR continued to stay within the double-A category. In particular, Fitch Ratings upgraded the MSAR's credit ratings to "AA" with a "stable" outlook in February 2018, based on the economy's strong rebound and the MSAR Government's commitment to fiscal prudence during the eight successive quarters of economic slowdown from Q3 2014 to Q2 2016. Meanwhile, the MSAR economy was assessed as "mostly free" for the 10th consecutive year, according to the Index of Economic Freedom compiled by the Heritage Foundation, ranking ninth out of 43 economies in the Asia-Pacific region and 34th among 180 economies.

With a primary function of serving real economic activities, the financial industry has continued to develop alongside the economic recovery while enhancing its risk management effectively. The MSAR's financial sector scored a decent rating of "substantial effectiveness in supervision" in the Mutual Evaluation Report published by the Asia-Pacific Group on Money Laundering (APG) in 2017. The local banking sector's asset quality remained high by international standards while asset size and profits attained the highest levels in history. In particular, the capital adequacy ratio reached 15.7% and the non-performing loan ratio stood at a low level of 0.2%. As regards the insurance sector, despite the effects of Typhoon Hato, its overall solvency remained intact with the arrangement of re-insurance in place for transferring risks, while the premium income continued to grow.

In line with the nation's development strategy and the MSAR's Five-year Development Plan (2016-20), the Monetary Authority of Macao (AMCM) has strived to reinforce regional cooperation to facilitate the long-term development of the financial industry. In 2017, three locally incorporated banks in the MSAR separately established their branches in Hengqin (Zhuhai), Guangzhou and Shanghai. Two major financial institutions based in Mainland China set up operating units in the MSAR. Furthermore, a memorandum of understanding for fostering mutual cooperation was signed between the AMCM and the China Banking Regulatory Commission towards the end of 2017.

The tightening of the monetary stance in advanced economies, the unstable external positions of certain emerging-market economies and the threat of trade war have made the global financial landscape more volatile. The MSAR's money-market interest rates are expected to move up in 2018 under a linked exchange rate system. Amid this complex and uncertain period, the MSAR will maintain its resilience with strong economic fundamentals and fiscal positions and benefit from active participation in the nation's Belt and Road Initiative (BRI) and the implementation of the Guangdong-Hong Kong-Macao Greater Bay Area development plan. The MSAR will strengthen its function as a Commercial and Trade Cooperation Service Platform between China and Portuguese-speaking countries, while the financial sector will brim with business opportunities.