Economy | Moody’s: Macau recession won’t end this year or next

Research and credit rating firm Moody’s has predicted that Macau’s economy will face an aggregate 6 percent contraction year-on-year during 2016 and that even a 2017 recovery is looking increasingly unlikely.
The firm estimates that Macau’s economy could further contract by 2.5 percent in 2017 and that growth may not resume for the next three years, though the pace of decline will relax.
“We expect that growth will continue to contract over our rating horizon of the next two to three years, although the pace of decline should slow,” Moody’s concluded in its annual credit report of Macau.
If they are correct, Macau will have to battle a longer-than-expected four-year recession, contrary to predictions earlier in the year that 2016 would herald a gaming recovery.
Despite persistent declines in gaming revenue and the subsequent government revenue earned through gambling taxation, Macau’s fiscal position remains robust for the time being. Moody’s maintains that this will remain true next year, when the government will continue to record a budget surplus.
According to data released this week by the Government Information Bureau, Macau’s fiscal reserves total more than MOP430 billion, not including the surplus from 2015.
Nevertheless, “a decrease in gaming revenues in 2016 and 2017” suggests that Macau’s economic, fiscal and external metrics will likely weaken considerably from prior robust trends.
Moody’s hinted that the government may face a budget deficit in the long run. The agency downgraded the SAR’s rating and assigned it a negative outlook in May, due to its failings to implement economic diversification reforms.
“Absent a strategy for fiscal reform, a higher than anticipated decline in surpluses could lead to an erosion in Macau’s fiscal buffers,” the statement noted.
The Monetary Authority of Macao has declined to comment, according to TDM.