Macau’s gross domestic product will not rebound to where it was before the Covid-19 pandemic until at least the end of 2025, according to Fitch Ratings.
The credit ratings company gave the city a ‘AA/Stable’ rating in April this year, a rating it said could face downside risks should the gaming sector fail to recover over the medium term.
Andrew Fennell, head of greater china sovereigns of the credit ratings provider, said in his latest note that a number of factors such as policy uncertainties on the Chinese mainland, monetary tightening worldwide, as well as coincident recessions in the United States and the Eurozone will hinder growth momentum in Macau.
He expects that the domestic economy will pick up by 46 per cent next year after contracting by 17 per cent overall in 2022, with “real GDP levels to remain below those of 2018”.
According to government data, the city’s GDP declined by 27.8 per cent in the first three quarters of the year, with the biggest fall recorded in exports of gaming services – about a 54-per cent decline.
However, the economist believes that a partial recovery in the gaming industry will push the city’s economy up soon as gross gaming revenue will recover partially to “half of the pre-pandemic norm”, driven by the mass-market segment expected to pick up as soon as travel curbs on mainland Chinese visitors are relaxed in stages.
Fennell yet stressed that the city’s recovery trajectory remains volatile in the near term, citing a lack of clarity when it comes to the timing and pace of policy shifts.
“The recent virus outbreaks on the mainland, including neighbouring Guangdong province, will delay a resumption of mainland packaged tours to Macau,” he said. “We believe the territory remains better placed to meet pent-up demand from mainland tourists than other APAC jurisdictions, once strict Covid-related policies are eased.”
Downside growth surprises in China could weigh further on the city’s gaming recovery, whereas a faster shift to ‘living with Covid’ and reduced periodic adjustments to testing and travel policies could pose an upside risk, the analyst stressed.
