The local economy is expected to grow by some 35 per cent in 2021, following a 50 per cent contraction in 2020, rating agency Fitch Ratings indicated in a report published today (Tuesday).
According to Fitch Senior Director, Andrew Fennell, following the unprecedented economic shock this year from the coronavirus pandemic, Fitch expects a meaningful growth recovery across Greater China in 2021.
‘Fitch Ratings forecasts growth in mainland China to reach 8.0 per cent in 2021, after slowing to 2.3 per cent in 2020. This should have positive spillovers for the neighbouring economies of Hong Kong, Macau and Taiwan, which are dependent on the mainland market for exports and tourism,’ Fennel states
For the analyst, a partial recovery of Macau’s gaming tourism sector in 2021 however, it will take time before the local economy – highly dependent on gaming tourism – returns to pre-COVID-19 activity levels.
‘We expect the authorities to deepen cooperation in the Greater Bay Area to diversify away from gaming Fitch forecasts the budget deficit will narrow to 3.4 per cent of GDP in 2021, from roughly 14 per cent in 2020,’ Fennel indicates.
‘Meanwhile, the territory’s large fiscal reserve, which we estimate at 275 per cent of GDP, provides substantial headroom should the tourism shock prove more prolonged than we currently expect’
The Macau SAR held MOP187.6 billion (US$23.50 billion) at the end of October 2020 in foreign exchange reserves, with financial reserves of almost MOP600 billion.
During his 2021 Policy Address, Chief Executive Ho Iat Seng had pointed to a Gross Domestic Product (GDP) drop of about 56.8 per cent for this year
The local Legislative Assembly has already approved the 2021 government budget which provides for an extraordinary injection of MOP26.6 billion from the financial reserve to counter an expected public administration deficit.
For next year, authorities estimated that the gaming sector will generate MOP130 billion in gross gaming revenues next year, with public coffers to collect some MOP45.5 million in gaming taxes.
However, while Fitch gave Macau an AA rating, the highest in Greater China, it also gave the SAR the only negative sovereign outlook prediction of the region.
‘Key downgrade triggers would be erosion in Macau’s sovereign balance sheet or in the prescribed autonomy of its government.