Ratings agency Moody’s Investors Service has maintained Macau’s local and foreign currency issuer ratings at Aa3 and changed the outlook from negative to stable.
In a Wednesday release, Moody’s cited the city’s substantial financial reserves, improved diversification and amended fiscal policies as the reasons behind its confidence.
“Macau’s financial buffers, which remained intact even in the face of the recent economic downturn, provide the government with significant means to mitigate the economic impact of potential future shocks,” the agency said. “Despite the sharp contraction in GDP in recent years, Macau has extended its long track record of fiscal surpluses, leaving the government with zero debt and large fiscal reserves of around MOP$472 billion (US$59 billion) as of March 2017, equal to nearly six years’ worth of 2016 public expenditures.
“We expect Macau will continue to run budget surpluses and accumulate fiscal reserves in coming years, albeit at a slower pace than before the downshift in gaming. Macau’s larger fiscal buffers, when compared with many other similarly-rated sovereigns, support its very high fiscal strength.”
The agency noted that Macau’s growing mass market base was another positive going forward.
“The ongoing shift to mass-market gaming, from VIP gaming, will support the profitability of gaming operators and enhance the resilience of the gaming sector,” it said. “The share of mass-market gaming revenues increased in the first quarter of 2017 to around 44% of all gaming revenues, from about 27% in 2011.
“Progress on the government’s diversification efforts is ongoing and starting to bear fruit. Their successful implementation would help boost the shock-absorption capacity of the economy.
“Macau’s economic recovery partly reflects the increase in per-capita spending in areas such as shopping, dining, entertainment, accommodation, and meeting facilities. Recent hotel and casino developments, and forthcoming projects, will include greater non-gaming facilities to boost non-gaming revenues.”
Macau’s local currency bond and deposit ceilings are unchanged at Aa2, the long-term foreign currency bond ceiling unchanged at Aa2 and the long-term foreign currency bank deposit ceiling unchanged at Aa3. The foreign currency short-term bond and deposit ceilings are also unchanged at Prime-1.
