Ratings agency Moody’s has affirmed Macau’s local and foreign currency issuer rating at Aa3 and maintained a stable outlook due to growing fiscal buffers and ongoing diversification efforts.
In a Wednesday update, Moody’s said the SAR’s substantial cash reserves provided it with significant capacity to counter future shocks, while the addition of more non-gaming facilities would over time ensure the market is less volatile.
Conversely, policy measures in China and US-China trade tensions continue to pose risks to Macau’s gaming and tourism sectors.
“On the upside, robust growth on the back of increasing gaming and tourism receipts, supported by the recent opening of the Hong Kong-Zhuhai-Macau Bridge, may raise Macau’s fiscal and foreign exchange reserve buffers even more than Moody’s currently expects,” Moody’s said.
“Moreover, diversification into mass market gaming and non-gaming tourism may be more rapid than currently assumed by Moody’s, lowering the SAR’s exposure to shocks to the VIP gaming sector.
“On the downside, diversification could prove less effective leaving Macau exposed to shocks, particularly those related to economic, financial and policy developments on the mainland.”
Moody’s noted that Macau’s fiscal reserve capital amounted to MOP$566 billion (US$70 billion) as of 31 March 2019, equal to around seven years’ worth of public expenditure for 2018 or 130% of 2018 GDP.
“Moody’s expects ongoing growth in gaming and associated tax revenue to support further large fiscal surpluses above 10% of GDP in the next two years, indicating the government will continue to add to its stock of financial assets,” it said.