Fitch affirms Macau’s AA rating

Fitch Ratings forecasts a stable outlook amid the gaming sector’s ongoing recovery.

Macau.- Fitch Ratings has maintained Macau’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at AA stable. It attributed the decision to strong public and external finances and fiscal prudence.

The ratings reflect the territory’s narrow economic base, high concentration of gaming tourists from mainland China (A+/Stable) and vulnerability to policy shifts that may affect China’s treatment of gaming tourism. Gaming operators’ non-gaming investments as part of their mandate during their decade-long concession term through 2033 will strengthen the economic and gaming outlook, according to analysts.

Policy initiatives, including the expansion of the Individual Visit Scheme and the promotion of large events, are also expected to sustain Macau’s recovery momentum. However, risks remain, including the possibility of a slowdown in China’s economy and policy shifts impacting gaming tourism.

According to analysts, growth in gross gaming revenue will help Macau’s economy grow by up to 15 per cent this year to about 79.5 per cent of pre-pandemic levels. In the first two months of 2024, GGR increased by almost 73 per cent compared to the previous year, reaching around 75 per cent of the revenue generated in 2019.

This growth was due to the strong increase in mainland Chinese visitors during the lunar new year. Fitch predicts that the mass-market segment will continue to drive GGR recovery, fueled by the increase in tourist inflows. However, the VIP segment will recover at a slower pace due to China’s stricter regulations on illegal cross-border gambling and Macao’s tighter regulatory framework for junket operations.

See also: IMF expects Macau GDP to rise 13.9% in 2024

In 2019, non-gaming industries contributed to just under 50 per cent of the gross value added, but the government hopes to increase this to around 60 per cent by 2028. However, Fitch predicts that implementing the plan may be challenging due to human capital constraints and skill mismatches.