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GGR downturn credit negative for Macau government

The decline in gross gambling revenue in Macau is seen as a negative to the credit rating of the government as the gaming industry comprises nearly half of the economy, credit ratings agency Moody’s said.

“Although the sector's rapid expansion has underpinned exceptionally strong

economic growth performance, with real GDP growth averaging 14.3 percent over 2009-13, the narrowness of Macau's economic base poses a high degree of vulnerability to adverse developments in the gaming industry,” said the credit rating agency.

In 2013, direct tax revenues from gaming grew by 18.5 percent from the previous year and have constituted 80 percent of the government's total revenues since 2010, up from 50 percent in 2002.

Revenues will likely remain under pressure as the gaming industry matures.

However, Moody’s said that although lower revenues from the gaming sector will dent Macau's economy and public finances, its substantial financial assets, lack of general government debt and high foreign reserves provide it with a sufficient buffer.

The agency maintained the credit rating at Aa2 with a stable outlook.

GGR had its first annual decline in 2014 since records began in 2002 as a crackdown on corruption on mainland China, coupled with a slowing economy, combined with tighter credit and visa restrictions to crimp gambling revenue.

GGR was down 2.6 percent for the year, led by a slump in VIP revenue. Most analysts don’t expect any turnaround until the second half of 2015 when new properties are expected to open, boosting visitation.

Chinese President Xi Jinping visited Macau in December and called again for Macau to diversify its economy away from gambling.


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