Photo: Lam Yik Fei/Bloomberg

Pneumonia impact on tourism worse than predicted but no impact expected to city credit rating – Fitch

The Senior Director for Asia Pacific Sovereigns at Fitch Ratings, Stephen Schwartz, told Macau News Agency (MNA) that the impact caused by the Wuhan pneumonia outbreak drop in visitor numbers to Macau seems to be “worse” than predicted, but did not expect an impact in the city’s credit rating.

“The impact is even larger than we even thought last week because the measures being taken to contain the spread are much more aggressive than what they were last week. So the near-term impact might be larger,” Mr. Schwartz told MNA.

In a note issued on January 24, Fitch Ratings had indicated that should the Wuhan viral outbreak escalate sharply, macroeconomic effects would initially be felt the most in Asia, and especially in the service sector activity, particularly in fields associated with tourism.

This scenario was also considered to possibly leave economies such as Hong Kong and Macau exposed, with both SARs already granted a Negative Outlook by the financial agency.

In just four days several measures have been imposed by Chinese and Macau authorities to limit travel movements during the Chinese New Year period so as to control a possible spread of the novel coronavirus, with special measures also imposed for Wuhan and Hubei province visitors.

Several large scale events and shows in the city scheduled for the Lunar New Year have also been cancelled and suspended by local authorities and companies; flights have been cancelled, and the streets in the city remained almost deserted as the local government has recommended residents to avoid crowded areas.

Just today the Macao Government Tourism Office (MGTO) revealed that the number of visitor arrivals between January 24 and 27 dropped 69 per cent year-on-year to 194,521, with analysts from Sanford C. Bernstein considering that the situation is ‘progressing worse than originally expected’.

“With Macau’s economy largely depending on the gaming sector to us it stands out as being more affected than other bigger economies potentially,” the Fitch Ratings Senior Director noted.

Mr. Schwartz noted that the situation is still developing and that given the aggressive measures being taken in China to contain the outbreak the near-term impact could rise.

“However, as a rating agency Fitch at the time does not expect the economic impact to have a credit impact. We do have Macau’s rating on negative for entirely different reasons related to ongoing integration with Mainland China and concerns about the governance system under the One Country, Two Systems framework […] but we don’t expect the economic impact by the virus outbreak to cause the ratings to move,” the analyst told MNA.

In December 2019 Fitch Ratings had revised the rating Outlook on Macau from Stable to Negative, but with the analyst considering this rating would not change due to the “strength” of Macau’s fiscal reserves and “its resilience”

As of today, more than 4,000 people have been infected across China, most of them in and around Wuhan, with 106 confirmed multiple deaths, including the first in the capital Beijing.

Chinese authorities have so far imposed a total lockdown in Wuhan, its seventh-largest city with 11 million inhabitants, and in several cities in Hubei province.

The public health emergency comes as China celebrates the Lunar New Year, the most important holiday of the Chinese calendar and during which hundreds of millions of Chinese travel.

In Macau, authorities have confirmed the 7th coronavirus case yesterday, a 67-year-old female Wuhan resident, with the new virus having infected almost 4,500 people and killed 106 people in mainland China.

Since Monday local authorities started requesting that anyone who comes from Hubei province or has travelled to the province on the 14 days before to present a medical certificate issued by a medical institution, proving that he is not a carrier of the infection with the new coronavirus.

Health inquiries and body temperature checks are also being conducted to visitors entering the city.

Yesterday authorities noted that no one from Hubei had managed to provide a health certificate approved by health authorities and therefore no one from the province had managed to enter the city since the new requirements were put in place.

When inquired about the impact of the outbreak in Hong Kong, the Fitch Ratings Senior Director stated that due to the ongoing anti-government protests in the city, visitation estimates were already bleak to start with it.

“Tourism was already way down. What we expect is that the virus outbreak will only add to the levels of tourism but it might not drive it much lower since tourism from the Mainland had already declined sharply down to about 15 per cent in the second half of last year. This will likely prologue the rates of tourism and delay the recovery,” he noted.

“in Macau, you have seen strong inbound tourism from Mainland China throughout the protests”