Credit and research agency Fitch has affirmed Macao’s long-term foreign currency default risk at AA – the second highest score in its scale of creditworthiness. The strong assessment was made on the back of what Fitch calls “the territory’s exceptionally strong public and external finances, and prudent fiscal management even during periods of negative revenue shocks”.
In a statement on 24 March, Fitch also said it expected Macao’s economy to grow by almost 50 percent in 2023 following a more than 25 percent contraction last year. It forecasts gaming revenue to “recover to about half of the 2019 level”, driven by a surge in visitor numbers following the removal of pandemic travel curbs.
Fitch researchers said Macao was “well placed to capture strong pent-up demand from mainland tourists, given its status as the sole legal gaming tourism destination across Greater China and its geographic proximity to the mainland”.
Some cautionary notes were sounded. The agency referred to Macao’s “narrow economic base” and heavy dependency on the gaming tourism market in China. It also drew attention to “bottlenecks for diversification”.
“We expect the diversification into non-gaming industries to remain slow”, Fitch said. “Human capital constraints and skill gaps pose a key challenge for Macao to substantially reduce its high dependence on the gaming industry”.
However, the agency pointed out that Macao’s fiscal debt would narrow in 2023 and that the territory’s reserves would remain “sizable” thanks to Macao’s “long record of fiscal prudence”. It also said Macao was able to “manage volatility in its external accounts”.