Moody’s Investors Service has slashed Macau’s sovereign credit rating, reflecting concerns the world’s biggest gaming hub is headed for volatile growth amid slumping casino revenue.
Macau was downgraded by one grade to Aa3 and assigned a negative outlook, Bloomberg reports, citing a statement from the rating agency.
Moody’s also lowered Macau’s long-term foreign currency bond ceiling to Aa2 from Aaa and its long-term foreign currency deposit ceiling to Aa3 from Aa2.
“We expect the economy will continue to contract during 2016 and 2017, although the pace of decline may ease,” Moody’s said.
While the government has tried to diversify the economy, “strategies center primarily around broadening Macau’s gaming and tourism market, leaving growth volatile and susceptible to shifts in external demand”.
In response, Macau’s monetary authority said it has “fundamentally sound” economic and financial conditions and noted that Moody’s had also assigned Aa3 ratings to mainland China and Belgium.
Macau’s long-term prospects would be supported by its “solid external financial position, credible policy framework and reliable linked exchange-rate system”, the monetary authority said.
Macau, which is due to announce its first quarter gross domestic product on May 30, saw its economy contract 20.3 percent in 2015 as its casinos were hit by China’s slowdown and a government anti-corruption campaign.
VIP gaming — the big money spinner for Macau — has been hammered by President Xi Jinping’s crackdown which has deterred high rollers from traveling to the only Chinese city where gaming is legal.
Bloomberg Intelligence’s index of Macau gaming stocks rose 16 percent in the first quarter after about US$46 billion of market value was wiped out last year from the city’s six gambling houses.
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