The FDI angle:

• Gross domestic product (GDP) growth and foreign direct investment (FDI) are linked to varying degrees over time.
• FDI can contribute to GDP growth by creating more economic activity in a country.
• Why does this matter? GDP growth forecasts are one indicator for the investment attractiveness of economies.

Economic growth forecasts are signals worth watching. While they are ultimately predictions that may not come to pass, they are part of a tool kit used by investors and policymakers to make informed decisions.

So, given their utility, which economy is predicted to grow the most next year? This heralded title goes to Macau, a semi-autonomous region of China and the home of Asia’s main gambling centre. 

The pandemic and travel restrictions in China battered Macau’s tourism-dependent economy. It is expected to bounce back, thanks to a recovery in tourism and its gaming industry alongside targeted government diversification policy and investment. 

Real gross domestic product (GDP) in the former Portuguese colony is predicted to grow by 27.2% in 2024, according to the IMF’s latest forecasts (released in October). This follows 74.4% growth in 2023.

In effect, Macau’s economy is expected to more than double its size when compared to 2022, when real GDP stood at just under $22bn. It will surpass its pre-pandemic high by 2025.

Relative to the world’s other fastest growing economies, the Las Vegas of Asia stands out. Macau, which is partially autonomous under China’s ‘one country, two systems’ policy, is the only advanced economy with a 2024 IMF growth forecast of more than 5%. 

The special administrative region had a GDP per capita of $54,300 in 2023, making it the 15th richest economy in the world. 

More data trends worth exploring: 

• EU expected to buck global investment outlook
• Middle East leads global tourism recovery
• Why more clarity is needed on investment incentives

Growth in Guyana, which placed second with a 2024 forecast of 26.6%, is driven by an oil boom. The Pacific Island nation of Palau will grow by 12.4% next year due to positive tourism trends and a strong rebound from weak construction activity.

By contrast, the driver of Macau’s remarkable growth estimates is the return of tourism and gambling from the lows seen during the Covid-19 pandemic. 

Between 2021 and 2022, visitor arrivals into Macau fell by 26% to 5.7 million — about the same as its decline in GDP, according to official figures. Beijing’s zero-Covid policies restricting travel from mainland China — the source of 90% of Macau’s tourism — were only fully lifted in February 2023. Travellers have since returned in droves. Inbound arrivals were over three times higher in the first eight months of the year compared to the same period of 2022, according to Macau’s government.

Gross gaming revenues in Macau’s casinos have also recovered from a near two-decade low in 2022, when they stood at just 42.8bn patacas ($5.3bn) — significantly down from the 293.3bn patacas seen in 2019.

Davis Fong, a professor of integrated resort and tourism management at the University of Macau, says that the territory has transformed into a “new business model” which aims to shift away from VIP gamblers to the mass market and non-gaming activities.

“The recovery phase has been much faster than we expected,” he adds.

Macau’s government is now focused on maintaining this economic recovery. It is expediting infrastructure projects and implementing its ‘1+4’ diversification policy, which aims to complement Macau’s dominant tourism industry with four supporting sectors of health, technology, finance and events. Part of this plan was the renewal of gaming licences in December 2022 for Macau’s six major casino groups, including MGM, Wynn Palace and Sands. They have committed to invest 108.7bn patacas into non-gaming related activities and exploring overseas consumer markets over the next decade. 

This new focus does not exist in a vacuum. It follows a crackdown by Beijing on Macau’s casino industry over concerns about capital outflows from China and high-roller gambler promoters known as ‘junket’ operators. The share of gaming revenues from VIP gamblers fell from roughly half before the pandemic to less than a quarter in 2022, according to official statistics.

Controversy aside, Macau’s post-Covid emergence makes for a compelling story. If the region’s projected growth is anything to go by, the new focus on the mass market seems to be working.