Fitch estimates 46% rebound in 2023 amid ‘lack of clarity’ on timing of policy shifts

Heightened policy uncertainty and a lacklustre recovery in mainland China, coupled with the global monetary tightening cycle and recessions in the US and Eurozone, will affect growth momentum in Hong Kong, Macau and Taiwan, according to Fitch Ratings.

In its report, the group forecasts a 46% rebound in 2023 from a 17% decline, while Hong Kong will face a 2.2% growth following a 2.8% downturn in 2022.

Real gross domestic product levels in both economies will remain below those of 2018, the statement read.

The forecasts are based on the institution’s assumption that the city’s gross gaming revenue (GGR) will bounce back to half of the pre-pandemic levels.

Recently, the SAR government announced that the city’s GGR will be MOP130 billion, similar to its forecast for this year.

However, data from the Gaming Inspection and Coordination Bureau shows that until November, revenues stood at only MOP38.7 billion – far below the government’s optimistic expectation of MOP130 billion.

According to the institution, it could take at least until end-2025 for GDP to return to its 2019 level, “along with a moderate non-gaming diversification.”

The statement was previously echoed by the local government where it stated that with the approval of the new gaming law and new concessions to be attributed before the year’s end, the gaming concessionaires will “promote next year the development of non-gaming elements, according to the commitment made on the public tender.”

Also, the white paper noted that the near-term recovery trajectory for Macau “remains volatile, due to a lack of clarity on the timing and pace of policy shifts.”

In the city, the local government has announced that a plan is underway to ease pandemic restrictions, a move that echoes Beijing’s relaxation of measures.

Yesterday, China rolled back rules on isolating people with Covid-19 and dropped virus test requirements for some public places in a dramatic change to previous strategy. The former strategy disrupted global manufacturing and trade as well as the lives of ordinary Chinese, while many nations switched to trying to live with the virus.

Fitch forecasts growth in mainland China to recover partially to 4.1% in 2023, from 2.8% in 2022, both well below pre-pandemic trends.

“With social tensions running high, we expect the mainland authorities to retire the most draconian elements of “zero Covid” – such as city-wide lockdowns,” the statement read.

“However, a fully-fledged policy pivot is not in our baseline, as we believe numerous restrictions will remain in place”.