Credit ratings agency Moody’s Investors Service has issued Macau with a strong “Aa3 stable” rating, citing the absence of government debt and fiscal surpluses as factors supporting the build-up of large fiscal reserves.
In a Tuesday release, Moody’s said the stable outlook also reflected Macau’s prospects for more resilient growth ahead while the city’s large financial buffers provided protection against any “sudden external shocks.”
“Such shocks would likely stem from economic, financial and policy developments in China,” the company said.
Moody’s warned that, “Macau remains susceptible to potential policy measures in China. For example, a further tightening of China’s anti-corruption crackdown and/or the introduction of gambling on the mainland would weaken gaming and tourism in Macau. As a small, open and concentrated economy, Macau’s GDP growth will remain volatile.”
However, it also expects Macau’s growth recovery to continue over the next two to three years on the back of growing gaming and non-gaming tourism.
Moody’s analysis of Macau follows an examination of the SAR across four categories: economic strength, which Moody’s assesses as “moderate”; institutional strength at “moderate (+)”; fiscal strength at “very high (+)”; and susceptibility to event risk at “low”.
The ratings agency could also upgrade the rating upon evidence that the government’s diversification plans — such as the expansion of non-gaming activities through family-oriented integrated resorts — are delivering stronger and more resilient GDP growth over a longer period of time than Moody’s currently expects.
Conversely, the rating could come under downward pressure from a renewed deep and prolonged economic downturn that leads to an erosion of fiscal buffers.