Macau | Fitch upgrades Macau rating to AA with outlook as stable

Fitch Ratings upgraded its Long-Term Foreign-Currency Issuer Default Rating (IDR) for Macau to AA from –AA

Macau (MNA) – Fitch Ratings upgraded its Long-Term Foreign-Currency Issuer Default Rating (IDR) for Macau SAR (MSAR) to AA from –AA, the company said in a press release on Tuesday. The ratings firm set the outlook for Macau as stable.

According to Fitch, one of the key drivers of the upgrade is that local ‘authorities have demonstrated a commitment to fiscal prudence through a period of gaming windfalls and a heavy revenue shock,’ taking the fiscal and external balance sheets of Macau to a stronger position that offsets ‘the significant risks associated with its narrow economic base and concentration on mainland Chinese gaming tourism’.

The analysis forecast that GDP in 2017 grew 8.7 per cent, mainly due to ‘a pick-up in gaming activity’. Fitch sees real GDP growing 5 per cent in 2018, as it takes into consideration gaming revenue growth of around 10 per cent.

According to Fitch, the local fiscal surplus rose to 10 per cent of GDP in 2017. The rating firm forecasts a 2018 budget surplus of 7.2 per cent.

Fitch also highlights that ‘fiscal buffers have continued to rise,’ making Macau ‘the only Fitch-rated sovereign globally without any outstanding government borrowings.’ Estimations by Fitch say that fiscal reserves were close to 137 per cent of GDP at the end of 2017.

The rating company sees the current account surplus rising to ‘35 per cent of GDP in 2018, up from an estimated 33 per cent in 2017, and well above the ‘AA’ median of 2.1 per cent,’ and remarks that the MSAR has recorded a current account surplus over the past 15 years.

‘External balance sheets, both on a sovereign and economy-wide basis, are also among the strongest across Fitch-rated sovereigns globally,’ the firm signals, with estimations of sovereign net foreign assets at 176 per cent of GDP, and the economy-wide net external creditor position at 216 per cent of GDP in 2017.