Fitch Ratings keeps Macau’s credit rating unchanged, but changes outlook to “negative”

17 December 2019

Fitch Ratings has kept its credit rating for Macau unchanged at “AA” but has downgraded its outlook from “stable” to “negative”, according to a statement issued on Monday in Hong Kong.

The agency explained its outlook downgrade based on Macau’s growing economic, financial and political ties with mainland China, which tend to make the credit ratings of both entities converge.

“This situation was also one of the factors that led the agency to reduce the long-term credit rating in foreign currency in Hong Kong in September 2019,” said the Fitch statement.

The Fitch Ratings recalls, however, that the credit rating for Macau is higher by two levels than that of mainland China and is based on the assumption that the governance of the territory, the rule of law, the structure of economic policy and the business environment and regulation remain distinct from those of the mainland.

However, it added that these assumptions are evolving as the two special administrative regions become more closely integrated in the national government system, “which has been accelerated by events in Hong Kong, as well as through political initiatives such as the Greater Bay, which seek to improve opportunities for regional growth in the long term, integrating the economies of southern China more closely.”

The other considerations for Macau remain unchanged and include exceptionally strong public and foreign finances, a continued commitment to fiscal prudence even in periods of economic downturn.

“The risk rating of Macau is dependent on the high volatility of local Gross Domestic Product and the reduced economic base, which consists essentially of tourism and is focused on gaming that originates in mainland China,” said Fitch Ratings. (macauhub)