Macao's "continued economic diversification away from the gaming industry" could lead to a "positive rating action or upgrade" for the country's rating, Fitch said. The comments were part of a report by the agency on Friday that identified Macao's long-term issuer default rating as "AA" and gave a "stable" outlook.
"While Macau's economy is highly dependent on mainland China, Macau's 'AA' rating is supported by exceptionally strong public and external finances, and has demonstrated fiscal prudence even during economic and gaming revenue shocks," Fitch analysts George Xu, Jeremy Zuk and Jan Friederich wrote in a recent report on Macau, a special administrative region of China
"The rating is limited by Macau's narrow economic base, its high concentration of gaming tourists from mainland China, and its vulnerability to policy changes that could affect China's treatment of gaming tourism," they added.
In March, Fitch said it assumed Macau's casino gross gaming revenue (GGR) would recover to 79.5% in 2019, compared with 62.6% of pre-pandemic levels in 2023, and expected Macau's economic growth to be about "15%" year-over-year in 2024.
Growth in the city's inbound tourism business, along with non-game investment commitments following a 10-year concession period by Macau casino operators, is expected to strengthen the city's economic and gaming outlook, according to the ratings agency.
Macau's government expects a fiscal surplus in 2024, with the city's casino GGR estimated to reach an annual MOP of $216 billion ($26.8 billion).
Fitch also said Macau's rating confirmation "reflects our assessment that the main driver of the negative revision of China's 'A+' rating on April 10 was not significant enough for Macau's credit profile."
The agency on Tuesday downgraded China's credit rating outlook, citing increased risks to China's finances as it faces economic challenges.
"The revised China outlook reflects the growing risk to the public fiscal outlook as China competes with more uncertain economic prospects, with the government shifting from property-dependent growth to a more sustainable growth model," Fitch said in a report on Friday.
Moody's changed its outlook for the Macau government to "negative" from "stable" in December, while maintaining its rating for foreign currency issuers in the region at "Aa3," indicating a very low risk of bad credit. The announcement comes after Moody's changed its outlook for China's "A1" from "stable" to "negative".
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