MONACO ECONOMY BULLETIN 3RD QUARTER 2018

by Marco Volpato

MONACO. Montecarlotimes’ rendering of the IMSEE Monaco Bulletin of the Economy for the 3rd quarter of 2018, on data collected since 1 January – The recent creation of Monaco Statistics, the Monegasque Institute of Statistics and Economic Studies, was a major decision by the Monegasque Government to enable better monitoring of the country’s future. Gathering, producing, analysing and disseminating this data increases overall knowledge and allows studies to be made, forecasts to be established and useful decisions to be taken.

  • Monaco Statistics role is to foster awareness of the economic and social environment of the Principality. It has become the main observer of Monegasque activity. Through the guidance it provides to both business and public stakeholders, it participates fully in the common objective of maintaining the Principality’s attractiveness.
  • For this purpose, the Institute has put in place an information system based on the collection of statistical data, endorsed by the Minister of State in consultation with the Scientific Council for statistics and economic studies. The information collected by Monaco Statistics is sourced from State departments, the Municipality and public bodies. The data is the subject of statistical processing in line with nomenclatures and methods recognised at international level, collated by Monaco Statistics.

The Bulletin of the Economy for the 3rd quarter of 2018, on data collected since January 1st, is available online. In the third quarter of 2018, the Principality’s turnover, excluding financial and insurance activities, increased by EUR 588.4 million, or 5.9%, exceeding EUR 10 billion for the first time. This rise is due primarily to good performance in the construction sector. Employment in the private sector was up 3.8% compared to the third quarter of 2017, with temporary employment making a significant contribution to this upward trend. In the tourism sector, the number of overnight stays increased and despite a rise in the number of rooms available for sale following the partial reopening of the Hotel de Paris, the occupancy rate was stable. The number of ports of call and cruise passengers rose. The property market experienced growth, with an increase in sales and resales.

The Economy in detail

The Bulletin of the Economy offers a synthesis of Monegasque economic activity for the preceding quarter. It is like a scorecard, making it possible to keep track of changes in the tourism, real estate and transport sectors, foreign trade, the Principality’s revenue, finance and employment. The figures for each period are aggregated and compared with those for the corresponding three months of the previous year. At the end of the bulletin, commentaries are included on each sector in order to emphasise or explain the key points. The Observatories of the Economy are more detailed. These are studies of specific sectors which present and comment on the annual figures relating to the Retail Trade, Foreign Trade, Industry and Real Estate. The introduction, on 1 January 2012, of the French classification of activities (NAF) 2008, allowed for a redefinition of the major economic sectors of Monaco, while ensuring international comparability. The presentation of GDP and of the Economic Bulletin in 12 sectors, rather than the previous 9, along with the removal of the sector “Various”, make it easier to understand the real economic situation.

Economy Bulletin – Data at 3rd quarter 2018 – The increase in both imports and exports has translated into growth (+30.0%) in the total volume of trade. Imports were more than double exports, resulting in a widening of the trade deficit. In the third quarter of 2018, the Principality’s turnover, excluding financial and insurance activities, increased by EUR 588.4 million, or 5.9%, exceeding EUR 10 billion for the first time. This rise is due primarily to good performance in the construction sector. Employment in the private sector was up 3.8% compared to the third quarter of 2017, with temporary employment making a significant contribution to this upward trend. The number of businesses launched fell but the balance (launches minus closures) remains broadly positive (+239). In the tourism sector, the number of overnight stays increased and despite a rise in the number of rooms available for sale following the partial reopening of the Hotel de Paris, the occupancy rate was stable. The number of ports of call and cruise passengers rose. The property market experienced growth, with an increase in sales and resales. Registrations of new vehicles continued to rise (+5.0%), and at a faster pace than in 2017 (+3.1%). Use of public car parks remained more or less unchanged (-0.3%). The number of helicopter flights fell, but passenger numbers were up.

Gross Domestic Product – Monaco’s GDP for 2017 was EUR 5.68 billion compared with EUR 5.85 billion in 2016, recording a drop of 3.5% in real terms (corrected for inflation). The pace of growth in the Principality has slowed since 2013 (from +9.7% in 2013 to +3.4% in 2016). In 2016, all growth stemmed from the performance of the construction industry (property development) and other service activities, which generated a substantial gross operating surplus. In 2017, these two sectors faltered and even experienced a slight decline. Their performance has had a direct impact on the Principality’s total GDP. Three sectors produce nearly half of the wealth generated in the Principality: Financial and insurance activities (17.8%);Scientific and technical activities, administrative and support services (17.0%);Real estate activities (10.0%), which reached the top three as a result of the decline in the construction sector. These three top sectors are making gains, with each having achieved their highest ever levels. The GDP of financial and insurance activities rose by 7.7%, exceeding EUR 1 billion for the first time. Despite the decline in GDP, employment continued to increase during 2017, in both the public and private sectors, with an additional 1,853 employees (+3.5%) recorded in December. The amount of wages paid rose by 4.1%, representing more than half of GDP (50.8%). This corresponds to the share of annually created wealth which is redistributed in the form of salaries and social security contributions. After four consecutive years of growth, the gross operating surplus generated by companies fell (-9.5% in nominal terms) – Monegasque entrepreneurs appear to have put employment ahead of their margins. Taxes paid on products increased 0.1% in nominal terms but fell by 0.6% in real terms (corrected for inflation), contributing 13.1% of wealth produced. VAT on property and transfer duties in particular declined, while other taxes rose. The amount of subsidies increased substantially (+16.1%), primarily due to the creation of the Dependency Fund and money allocated to the energy transition. GDP per capita was EUR 67,786, down 6.7% in real terms. GDP per employee, an indicator of productivity, also fell by 6.8% to EUR 104,603.

Retail trade – Barometer (monthly business survey) – According to the retailers interviewed, in October 2018, the business climate decreases and remains unfavorable in the retail trade and in the trade and repair of motor vehicles. Standardized summary indicator (average=100 and standard deviation=10)

Observatory – The retail sector comprised 801 operational businesses in 2017, representing 8.6% of all businesses in the Principality. More than 29% of businesses active in 2017 were started between 2013 and 2017. Half of them were at least 10 years old. The average age of a business in the sector is 14.4 years, compared with 13.0 across all sectors. With total turnover of EUR 1.4 billion in 2017, retail trade is the fourth largest contributor in terms of turnover, excluding financial and insurance activities, behind wholesale trade, construction, and scientific and technical activities, administrative and support services. Retail trade accounts for 10.6% of the Principality’s total turnover, excluding financial and insurance activities. Turnover in the sector fell 4.5% compared with 2016, which was a record year, but nonetheless kept pace with 2015. The motor vehicle sector and shops selling personal attire have seen the largest growth in terms of turnover since 2001. In 2017, turnover in the motor vehicle sector accounted for 33.2% of retail trade, up six points on 2010. Car sales have experienced average annual growth of 7.2% since 2001, compared with 3.6% for traditional retail sales (excluding cars) In terms of numbers of employees, the retail sector is the seventh largest, excluding domestic staff. In December 2017, the sector employed 2,769 people, or 5.8% of the Principality’s total workforce, excluding domestic staff. he retail sector has the second largest proportion of women in the workforce, behind the government, teaching, health and social work sector, with women accounting for 54.1% of employees, compared with an average of 38.2% across all sectors (excluding domestic staff). There are differences within the retail sector depending on the type of activity: 73.8% of staff in shops selling personal attire are women, but this figure drops to 22.1% in the motor vehicle sector.

Foreign Trade – As a result of the Customs Union which exists between France and the Principality of Monaco, goods and services traded between the two countries are not subject to customs formalities. The data presented here relates solely to trade between the Principality of Monaco and the rest of the world, excluding France. The global recovery observed since mid-2016 is confirmed in 2017.  Overall production is growing faster than forecast.  World trade is growing, thanks in particular to increased investment in advanced countries and increased manufacturing output in Asia.In this fairly dynamic international context, the Principality of Monaco’s foreign trade showed more moderate growth in 2017 (+1.1 %) following the strong growth of 2016 (+11.1 %). While the overall volume of trade continues to grow, there has been a growing divergence between imports and exports since 2013.  The amount of products sold abroad is decreasing, while imports and purchases are increasing. The trade balance has deteriorated markedly since 2013. More than three-quarters of Monegasque trade is with partners on the European continent and mainly with members of the European Union. Goods from the Manufacture of other industrial products (perfumes, cosmetics, etc.) account for more than half of trade (56.4 %).

Real Estate – The year 2017 saw the highest recorded number of sales (50) since 2006.  However, 84.0% of transactions involved studios or one-bedroom apartments. Sales fell from EUR 453.5 million in 2016 to EUR 228.9 million in 2017, a decrease of 49.5%.  After three years marked by major transactions involving properties of four or more bedrooms, in 2017, 62.7 per cent of the total transactions involved properties of one bedroom or fewer.  The marketing of the Stella, a building currently under construction, comprised only of one-bedroom apartments, explains this phenomenon.

Resales – The number of transactions decreased sharply (-21.9%) and returned to the levels of 2013.  All types of apartments are affected by this decline, excluding detached houses (properties that are most often destined to be demolished and rebuilt).  The number of transactions involving studio apartments was virtually stable (-0.8%).  It represents 29.8% of resales.  Transactions involving three-bedroom properties decreased the most (-41.3%). The reduction in the number of resales logically led to a reduction in the number of transactions. The sharp increase in the number of transactions involving detached houses (most often acquired for real estate development) limited the downturn in the market.

Industry – Turnover in the Industry sector was EUR 964.4 million, accounting for 6.6% of the Principality’s turnover (excluding Financial and insurance activities). Once again, it experienced a decline in 2015 (-6.7%). The share of the total turnover of the Monaco economy accounted for by the Industry sector declined slightly (-1.2 percentage points over 10 years). This rate is rising because domestic demand is falling more quickly than external demand. In 2015, the export rate was 37.3%, which was stable compared with 2014. Manufacturing continued its decline (-8.2%) while Services in support of the extractive industries, energy, water, waste and decontamination experienced growth of 4.1% in 2015. Manufacturing has in fact been in sharp decline since 2012, against the background of an unfavourable global economic context. The sector saw its lowest level of turnover since 2006. On the other hand, turnover in the Services in support of the extractive industries, energy, water, waste and decontamination sector has recorded growth of 42.1% over 10 years.Within the manufacturing sector, three industries stand out in terms of turnover: the manufacture of rubber and plastic products (37% of the manufacturing sector’s turnover), the chemical industry (17%) and the pharmaceutical industry (14%).In 2015, 167 businesses were operating in the Industry sector, accounting for 3% of all businesses in the Principality. There were 124 employers in this sector, up 6% compared with 2015 (+7 compared with 2014). The number of employees per employer, however, has been falling since 2011. There are now nine more employers in businesses with less than 50 employees, and two fewer employers employing between 50 and 200 employees. Between them, these 124 employers employ 2,872 staff, 35.5% of whom are women. By nationality, 73.0% of the employees are French, 17.8% are Italian, and 1.5% are Monegasque (1.4%)

Focus Economy – Finance

Transportation and storage – In 2017, Transportation and storage realise 4.3 % of turnover, excluding Financial and Insurance Services and employ 4.0 % of the Principality’s private sector employees.Information and communication – In 2017, Information and Communication account 5.9 % of turnover, excluding Financial and Insurance Services and employ 2.4 % of the Principality’s private sector employees. Construction – In 2017, Construction achieves 12.9 % of the turnover, excluding Financial and Insurance Services, employing 9.6 % of the private sector employees of the Principality. Corporate governance – There are 10,627 business leaders within the boards of directors and decision-making bodies of the companies registered in the Trade and Industry Register, as at December 31, 2017. It is an increase of 6.1% compared with the same period in 2016. Public Finances – Public finances are detailed through the presentation of the National Budget and the Constitutional Reserve Fund (FRC). Both experience a positive 2017 year, with a developing surplus budget, despite a decline in revenue, and an increasing value of FRC (+7.6%). Retail trade – In 2017, the retail sector encompassed 801 very different businesses. Together, they make up the fourth largest sector in terms of turnover (excluding financial and insurance activities), at 1.4 billion euros.Variations from year to year should be interpreted with caution, since some types of activity with occasional exceptional performance can influence the overall trend by themselves. Over the long term, turnover is increasing, particularly due to car sales. The majority of employment indicators were stable in 2017. Manufacturing, mining and quarrying, and others industries – In 2017, Manufacturing, mining and quarrying, and others industries achieve 6.2 % of the turnover, excluding Financial and Insurance Services, employing 5.3 % of the employees of the Principality. Scientific and Technical Activities, Administrative and Support Service – Second in terms of its contribution to Monaco’s GDP, this sector is the country’s largest employer and accounts for the highest number of businesses. It had the third largest turnover among major sectors of the economy (excluding Financial and Insurance Services) in 2017. The activities covered by this sector are extremely diverse, resulting in significant differences in the structure of businesses and in their contributions to employment and turnover. Accommodation and Food Service Activities – The accommodation and food service activities had a difficult year in 2016. The sector experienced a loss of 246 jobs (-4.1%) and a reduction in turnover of EUR 26 million (-3.9%). Hotels and similar accommodation accounted for 208 of the job losses and EUR 25.6 million of the drop in turnover. Good performance by restaurants and mobile food service activities (+EUR 3.3 million) did not make up for the decline in the other NAF groups. Wholesale trade – For the third consecutive year, turnover in the Wholesale Trade sector has declined. With a fall of 9 % in 2015, smaller than in 2013 and 2014, the sector has seen its turnover drop by more than 42 % in three years, declining from 8 billion to 4.6 billion. It nevertheless represents more than a third of the Principality’s turnover, excluding Financial and Insurance Activities. The Wholesale Trade sector does not employ a large workforce; the creation of wealth is largely derived from the gross operating surplus of companies in the sector. As in previous years, the drop in turnover did not affect employment, which continued to grow (+4 %), accounting for 5 % of total employment. Automobile Market – This first issue of Focus analyses the automotive industry, which is traditionally defined by the matching of supply (production of vehicles) with demand (vehicle registrations). In the Principality, other than Venturi, the market is based only on vehicle registrations. Statistics on the automotive industry market therefore only relate to registrations carried out by the Driver and Vehicle Licensing Office. The period examined was the first six months of 2012.

Sector-specific Focus methodology

Each sector-specific Focus presents an annual analysis of a specific major economic sector (MES), providing an overview of the sector using the following economic indicators: employment, turnover and contribution to gross domestic product. While the lines of analysis remain the same in each Focus, the phenomena observed may be illustrated by the addition of complementary information depending on the sector under review. General information: N and N-1 data are provisional datasets which may be enriched. N-2 data is definitive. Monaco Statistics publishes the latest available data. Unless otherwise indicated, financial data is given in millions of euro (€M). In some tables, due to rounding, the results of the groups may not always correspond to the sum of the elements of which they are composed. NAF: The adoption of the French classification of activities (NAF, Rev. 2, 2008) on 1 January 2012 required a redefinition of the major economic sectors (MES). In order to reflect as closely as possible the reality of Monaco’s economy, 12 major economic sectors were retained, based on an aggregation of the 21 NAF 2008 sections (Level 1). Depending on the MES under review, the Focus presents employment and turnover data by NAF division (Level 2) or NAF group (Level 3). Employment: the data is sent by the Monaco Social Security Funds on the first Saturday of March N+1. The number of jobs is the number declared to the Social Security Funds for the month of December. To make it more relevant, data on hours worked and wages is presented for the year to date. This data may be revised following adjustments made by the Social Security Funds. Turnover: the data, which comes from VAT declarations for the submission period and is collected by the Department of Tax Services, is as of 31 December of year N. Monaco Statistics extracts two datasets on 31 March N+1: for 31/12/N and for 31/12/N-1. GDP: the Principality has retained the GDP approach as an indicator of revenue in the absence of national accounting. Data relating to the gross operating surplus of Monegasque businesses is obtained via a survey. The GDP for year N is usually published by Monaco Statistics during November of the year N+1. Since Focuses are published from April N+1, the GDP by sector data presented relates to the year N-1.

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