Fitch Ratings forecast Macau’s economic growth of about “15% year-over-year” in 2024, assuming total casino gaming revenue (GGR) will recover to 79.5% in 2019, compared with 62.6% of pre-pandemic levels in 2023.
The move follows measures announced on Friday. The agency confirmed Macau’s long-term foreign currency issuer default rating (IDR) at “AA” with a stable outlook.
The ratings for Macau take into account the country’s “exceptionally strong” public and external finances and that it has demonstrated fiscal prudence.
Fitch Ratings further observed: “The ratings also reflect the territory’s narrow economic base, its high concentration of gaming tourists in mainland China (‘A+/stable’) and its vulnerability to policy changes that could affect the treatment of gaming tourism in China.”
Mainland China has long been Macau’s most important tourist source. This month, China’s cities of Xi’an and Qingdao were added to the Mainland’s list to participate in the IVS, an outbound visa scheme for traveling to Macau and Hong Kong, bringing the number of Chinese cities to 51 from 49.
“We expect Macau’s recovery momentum to be supported by the expansion of individual visitation plans targeting more mainland Chinese cities and the government’s push for various mega-events to meet changing Chinese consumer preferences,” Fitch said in a commentary on Friday.
However, a sharp slowdown in China is a major downside risk to Macau’s economic and economic recovery prospects,” it warned
The growth of the city’s inbound tourism business, along with non-game investment commitments by Macau casino operators following a 10-year concession period, is expected to strengthen the city’s economic and gaming outlook, according to the rating agency.
“We expect Macau’s budget to return from a modest deficit of 0.6% in 2023 to a surplus of 3.8% of GDP in 2024 for the first time since 2020,” Fitch also said in an update on Friday.
Macau’s government expects a fiscal surplus in 2024, estimating the city’s casino GGR to reach MOP 216 billion ($26.8 billion) annually.
“The [Macao] government expects a modest surplus of 0.3% in 2024, but game revenues are expected to be 7.6% higher than budget households and we believe spending will remain budget short as in previous years,” Fitch said.
Macau is the “only country” in Fitch’s global portfolio of countries with no outstanding government debt. As of the end of 2023, Macau’s fiscal reserves stood at MOP580 billion.
“We expect fiscal buffers in the region, currently equivalent to about six times our expected 2024 spending, to remain substantial and maintain key credit strength, assuming a sustained fiscal surplus over the medium term,” the rating agency said.
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