Fitch Ratings Inc forecasts Macau’s economic growth to be about “15 percent” year-on-year in 2024, on assumption that the city’s casino gross gaming revenue (GGR) recovers to 79.5 percent of 2019’s, compared to 62.6 percent of pre-pandemic level in 2023.
That is according to a Friday rating action commentary. The institution affirmed Macau’s long-term foreign-currency issuer default rating (IDR) at ‘AA’ with a stable outlook.
Ratings on Macau were in light of the city’s “exceptionally strong” public and external finances, as well as its demonstrated fiscal prudence.
Though Fitch Ratings additionally observed: “The ratings also reflect the territory’s narrow economic base, high concentration on gaming tourists from mainland China (‘A+/stable’) and vulnerability to policy shifts that may affect China’s treatment of gaming tourism.”
Mainland China has long been Macau’s most important source of tourists. The addition this month, of Chinese cities Xi’an and Qingdao to a list of mainland places eligible to take part in the country’s Individual Visit Scheme (IVS) – an exit visa system for travel to Macau and Hong Kong – takes the tally to 51, from 49.
“We anticipate Macau’s recovery momentum will be underpinned by the expansion of the Individual Visit Scheme to cover more mainland Chinese cities and the government’s promotion of various mega events to meet shifting Chinese consumer preferences,” said Fitch Ratings in the Friday commentary.
But it has also warned: “A sharper slowdown in China is a key downside risk to Macau’s economic and gaming recovery prospects.”
Macau casino operators’ non-gaming investment pledges under their respective 10-year concession term, along with the growth in the city’s inbound tourism business, are expected to bolster the city’s economic and gaming outlook, according to the rating agency.
“We forecast Macau’s budget will revert to a surplus of 3.8 percent of GDP [gross domestic product] in 2024, the first since 2020, from a modest deficit of 0.6 percent in 2023,” Fitch Ratings also said in the Friday update.
The Macau government has anticipated a fiscal surplus for 2024, and estimated the city’s casino GGR to reach MOP216.0 billion (US$26.80 billion) in the full year.
“The [Macau] government projects a more modest surplus of 0.3 percent in 2024, but we expect gaming revenue to be 7.6 percent higher than the budget assumption and we believe expenditure will remain under-budget as in previous years,” Fitch Ratings stated.
Macau is the “only entity” in Fitch Ratings’ global sovereign portfolio without any outstanding government debt. The city’s fiscal reserves as of end-2023 stood at MOP580 billion.
“We expect the territory’s fiscal buffers, currently equivalent to roughly 6 times of our projected expenditure for 2024, will remain considerable and a key credit strength, based on our assumption of persistent fiscal surpluses over the medium term,” the rating agency remarked.
