Moody’s Investors Service downgraded the Macau government’s credit rating, reflecting concerns the region will suffer volatile growth amid slumping gaming revenue.
The world’s largest casino hub was cut by one grade to Aa3 and assigned a negative outlook, the rating agency said in a statement yesterday. Moody’s also lowered Macau’s long-
term foreign currency bond ceiling to Aa2 from Aaa and its long-term foreign currency deposit ceiling to Aa3 from Aa2.
“We expect the economy will continue to contract during 2016 and 2017, although the pace of decline may ease,” Moody’s said. While the government has tried to diversify the economy, “strategies center primarily around broadening Macau’s gaming and tourism market, leaving growth volatile and susceptible to shifts in external demand.”
In response, the city’s monetary authority reiterated in a statement the Chinese enclave’s “fundamentally sound” economic and financial conditions, and noted that Moody’s had also assigned Aa3 ratings to mainland China and Belgium.
Macau’s long-term prospects would be supported by its “solid external financial position, credible policy framework and reliable linked exchange-rate system,” the monetary authority said.
Macau, which is due to announce its first quarter gross domestic product on May 30, saw its economy contract 20.3 percent in 2015 as its casinos were hit by China’s slowdown and a government anti-corruption campaign. VIP gaming – the big money spinner for Macau – has been hammered by President Xi Jinping’s crackdown which has deterred high rollers from traveling to the only Chinese city where gaming is legal.
The region is looking at building a theme park and introduce international sporting events to diversify its economy, as it estimates non-gaming tourism receipts to grow to as much as USD14 billion by 2025, up from USD6.4 billion in 2015, according to a government plan this week.
Over the medium term, annual real GDP growth should stabilize at 1.5 percent to 2 percent, Moody’s said. While the city continues to post fiscal and current account surpluses, the fiscal surplus in 2015 dropped to 7.9 percent of GDP from 20.4 percent due to the economic shock, and is expected to fall further this year, the agency said. Daniela Wei, Bloomberg
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