Regional and global uncertainty and the impacts on the tourism and gambling industry of Macao

Abstract For decades, gambling has been Macao’s pillar industry. In 2023, the gambling sector accounted for 38.3% of Macao’s total economic output, highlighting its fundamental role in the city’s economy. In this study, we employ vector autoregression to examine the impact of regional and global uncertainty on Macao’s gambling industry. Our results indicate that both regional and global uncertainties negatively affect Macao’s gaming revenue, with gloabl uncertainty exerting a greater influence in the variance decomposition. However, the gambling industry remains highly resilient, as uncertainty—both regional and global—only accounts for approximately 16.7% of the variance decomposition of gaming revenue. Policymakers should consider this relative insensitivity when formulating economic policies in an increasingly uncertain global landscape and when pursuing economic diversification strategies. This paper also suggests that maintaining tourism and gambling as Macao’s pillar industry could help the city navigate economic and political uncertainty until a more resilient sector is identified. IMPACT STATEMENT This study examines the sensitivity of Macao’s gaming industry to uncertainties. While economic diversification remains a key policy priority, developing sectors that are more vulnerable to uncertainty than gaming could increase the city’s exposure to economic fluctuations. The findings reveal that the gaming sector demonstrates notable resilience to both regional and global uncertainties. These results suggest that stakeholders should evaluate the robustness of different sectors before pursuing diversification, prioritizing those with equal or greater resilience to uncertainty.