The Macao Special Administrative Region (SAR) Government has responded to Moody’s Investors Service’s decision to revise Macau’s outlook from stable to negative, expressing disagreement with the rating agency’s assessment. Moody’s attributed the downgrade to China’s weakening economy, impacting Macau due to their close political, institutional, economic, and financial ties. In contrast, the SAR Government contends that Macau’s economy is steadily recovering, emphasizing its prudent fiscal management and robust financial position.
Moody’s Downgrade and Macau’s Response:
Moody’s revised Macau’s outlook based on the downgrading of mainland China’s A1 rating from stable to negative, citing interconnected linkages between Macau and China.
The Macau SAR Government disagrees with Moody’s assessment, highlighting the SAR’s steady economic recovery, prudent fiscal management, and strong financial position.
Macau’s Economic Resilience:
The SAR Government emphasizes Macau’s resilience, with no debt burden, sound public finances, and robust fiscal and foreign exchange reserves, providing a strong defense against external risks.
Macau’s banking system is characterized by good asset quality and capital levels, contributing to its overall economic stability.
Tourism and Gaming Sectors’ Contribution:
Macau underscores the significant contribution of its tourism and gaming sectors, emphasizing their steady recovery with a year-on-year GDP growth of 77.7% in the first three quarters of 2023.
Full resumption of people-to-people exchanges and tourism activities supports Macau’s economic revival, aligning with the government’s focus on tourism promotion and non-gaming projects.
Close Economic Ties with Mainland China:
The SAR Government believes that Macau’s close economic ties with mainland China remain a key support for its long-term development.
Despite global economic uncertainties, China’s steady 5.2% real-term economic growth in the first three quarters of 2023 is seen as a positive factor for Macau’s external demand.
Moody’s Assessment of Macau’s Dependence on China:
Moody’s points out Macau’s heavy dependence on China, particularly in the tourism and gaming sectors, as well as exposure of its banking system to cross-border claims.
The rating agency notes increased political and institutional linkages in recent years, despite the retention of Macau’s policy autonomy under the “One Country, Two Systems” principle.
China’s Response and Macroeconomic Outlook:
China’s Ministry of Finance disputes Moody’s downgrade, highlighting China’s ongoing macroeconomic recovery and its role as a crucial engine for global economic stability.
Macau and China’s intertwined economic dynamics continue to play a significant role in shaping the SAR’s outlook, with global uncertainties considered in the context of their relationship.
The contrasting viewpoints between Moody’s and the Macau SAR Government underscore the complexity of evaluating Macau’s economic outlook. While Moody’s emphasizes dependency and evolving linkages, the SAR Government asserts its resilience, prudent financial management, and the ongoing recovery of key sectors. As Macau navigates the intricate balance between economic ties with mainland China and maintaining autonomy, the trajectory of its economic recovery remains a focal point in the dynamic landscape of global finance.