Credit rating agency Fitch Ratings published a report on Monday affirming their assessment of the Macau SAR at AA-, or “Stable Outlook”, with the territory’s rating ceiling holding constant at AA+.
The rating has held high due to what Fitch describes as Macau’s “credible policy framework” and prudent public and external finances, which “continue to strengthen despite three consecutive years of economic contraction.”
Despite the recession, the budget surplus remains strong. Fitch estimates it to have been around 6.2 percent of GDP last year, significantly higher than the government’s original estimate of 1 percent, and estimates that this may hold strong at 5 percent in 2017.
Moreover, due to the accumulation of large fiscal reserves during the gaming boom and the fact that the MSAR is responsible for zero government debt, state finances are in a good shape. The firm estimates that the accumulated surpluses grew to 137 percent of GDP at the end of last year, equivalent to more than five times the project budget expenditure for 2017.
“Key assumptions” in the report clarify that Fitch’s outlook depends on China avoiding an economic “hard landing or banking sector crisis” and on Macau maintaining the high degree of autonomy granted by the Basic Law provisions.
Fitch added that “the main factor that could lead to a positive rating [upgrade] is diversification of the economy into sectors less reliant on gaming and China.” DB
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