Recently, Moody’s, a financial rating agency, downgraded Macau’s economic outlook from “stable” to “negative.”
This adjustment links closely to Macau’s deep ties with mainland China. The decision faced criticism from Macau’s authorities, who disagreed with Moody’s assessment.
Moody’s explained that the change reflects Macau’s strong political, institutional, economic, and financial connections with mainland China.
The agency specifically noted that Macau’s tourism and gaming industries rely heavily on Chinese visitors.
Also, Macau’s banking system is exposed to the economic fluctuations of mainland China, whose rating Moody’s has similarly downgraded.
In response, the Monetary Authority of Macau (AMCM) issued a statement Wednesday night.
They countered Moody’s view, arguing that Macau’s close economic ties with mainland China actually support Macau’s long-term growth.
The AMCM acknowledged the current global economic challenges but pointed to China’s GDP growth of 5.2% until September as a positive factor for Macau.
Moody’s, while lowering the outlook, maintained Macau’s rating at Aa3. This rating indicates a high investment grade with very low credit risk.
Moody’s added that Macau’s substantial fiscal and external reserves provide a strong buffer.
These reserves help absorb economic shocks and negative long-term trends, including the slowdown in mainland China’s economy.
Disappointment with Moody’s decision
Additionally, Moody’s revised China’s outlook from “stable” to “negative.”
This revision is due to China’s high debt levels and the likelihood of government support for struggling regional governments and public enterprises.
Moody’s highlighted that this poses risks to China’s fiscal stability, especially given the current economic slowdown and issues in the real estate sector.
China’s Ministry of Finance expressed disappointment with Moody’s decision.
The real estate sector, which has long been a significant part of China’s GDP, is now facing buyer distrust.
This distrust stems from financial troubles in major real estate groups, unfinished housing projects, and declining prices.
The real estate sector comprises about 70% of Chinese household wealth.
In response to these challenges, the government has increased support for the sector, but the results remain uncertain.