Fitch projects 24 percent contraction of Macau economy in 2020

Fitch Ratings issued a report on Monday projecting a 24 percent contraction in Macau’s economy over the course of 2020.

“Macao's concentration on gaming tourism exposes its economy to substantial disruptions from lockdown measures imposed to contain the coronavirus pandemic. As a result, Fitch expects Macao to experience a much deeper economic contraction in 2020 than other 'AA' rated peers whose economies are less dependent on tourism,” they wrote.

Fitch anticipates the 2020 annual GGR will be down roughly 40 percent on the previous year’s figure.

“Macao's overwhelming dependence on gaming tourism constitutes one of its principal rating constraints. Macao is one of the world's biggest gaming tourism hubs and Fitch estimates the gaming industry represents 51% of aggregate activity, 22% of employment, and more than 80% of fiscal revenue,” the report noted.

The report also projected that Covid-19 related economic relief measures would push Macau into a budget deficit of approximately 7 percent, the first such deficit since the 1999 handover to Chinese sovereignty.

On the other hand, the report also noted that Macau’s finances remained robust overall, and that there could even be some silver linings in the crisis: “Macao could benefit from a moderate economic diversification from the gaming industry and a shift towards a more stable growth model over time.”

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