Moody’s Investors Service has kept Macao’s long-term issuer rating at “Aa3,” meaning the SAR is still subject to a very low credit risk. Aa3 is Moody’s fourth highest rating, and one notch above the “A1” status given to mainland China.
Macao’s high per capita income and absence of outstanding government debt were behind its strong rating, Moody’s noted on Tuesday. “Moreover, its large fiscal and external reserves provide the economy with very strong buffers to absorb shocks and negative long-term trends including a structural slowdown in China’s economy.”
Both Macao and the mainland maintained their “negative” outlooks, however, indicating a higher risk of future downgrades than a “stable” outlook would. Mainland China’s negative status is driven by trade tensions with major partners like the US threatening to hinder its “transition to higher productivity-led economic growth” and efforts to constrain government debt, Moody’s stated.
The SAR’s negative outlook meanwhile stems from the “tight economic, political and institutional linkages” between it and the mainland, Moody’s said – highlighting Macao’s dependence on mainland Chinese demand for its gambling and tourism offerings.
[See more: ‘Bear case.’ JP Morgan downgrades its 2025 gross gaming revenue forecast]
“There are risks that Macao’s currently very large fiscal and external buffers may erode over time, should Macao’s growth prospects weaken,” the credit rater warned.
“In particular, weaker economic activity in the gaming sector would lower government revenue and services exports, undermining fiscal and current account surpluses in the absence of mitigants such as expenditure restraint or a material diversification of the SAR’s economic structure.”
Macao’s gross domestic product decreased by 1.3 percent year-on-year in the first quarter of 2025, attributed in part to rapid shifts in visitor consumption patterns and weakened spending sentiment that contributed to a lacklustre performance by the city’s casinos. That in turn saw gaming taxes track below government expectations during the first quarter, prompting concerns around a 2025 budget deficit.
The government, meanwhile, has been ramping up efforts to diversify Macao’s economy away from its extreme reliance on the gambling industry and reframe its reputation to that of an international business and cultural hub. The moves are in line with recommendations issued by Beijing’s top Macao affairs official, Xia Baolong, who visited the city earlier this month.
