“Our baseline assumes a stronger gaming and tourism recovery in the second half of 2021 relative to the first six months,” said Fitch, noting that it expected the travel restrictions between mainland China and Macau to be eased further in the months ahead” following the gradual roll-out of vaccination programs in respectively the mainland and Macau.

The ratings agency also said that a potential quarantine-free travel bubble with other markets such as Hong Kong – “should also support a gradual return of inbound visitors” to Macau.

But it stated: “Uncertainty surrounding the recovery trajectory remains elevated. Sustained recovery in 2021 and beyond will hinge on steady progress in virus containment, effective vaccine distribution and China’s evolving policies towards cross-border travel and gaming.”

“This is exemplified by precautionary travel restrictions imposed in the mainland for virus containment during the 2021 Chinese New Year, which prevented many mainland tourists from visiting Macau,” added the institution. “The VIP segment will remain sensitive to changing economic and regulatory conditions in the mainland.”

Fitch revised the outlook on the city’s long-term foreign-currency issuer default rating to “stable” from “negative”. Macau, with its rating affirmed at AA, remains the only Fitch-rated sovereign without any government debt.

Despite Macau’s “exceptionally strong” public finances and its sustained fiscal prudence, its over-reliance on gaming tourism from mainland China has constituted its principal rating constraints and its “historically high levels of GDP volatility”, said Fitch.

Fitch forecasts the Macau government’s budget deficit narrow to around 5% of GDP in 2021, “as gaming tourism gradually recovers and expenditures are kept under budget.”

Editing by Rachel Hu

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There is a variety of opinion among scholars and legal experts about whether China’s criminalization of anyone assisting “cross-border gambling”, which came into effect on March 1, is meant to cover gambling in Macau.

But experts suggested that in the absence of clarity on that point, junkets and players were being conservative in their approach, and that was putting a chill on the operation of the whole VIP sector.

Kwok Chi Chung, president of Macau Association of Gaming and Entertainment Promoters, said it was “impossible” for VIP gaming sector to return to pre-Covid 19 levels of business.

That was because of the pandemic’s disruption to mainland China’s outbound tourist visa system, and constraints on money flow out of the mainland, as well as the latest criminal code changes, he added.

“In fact, I will not be surprised if there are only a couple of major junket firms left standing in the market in the future,” said Mr Kwok. “Is Macau’s VIP gaming sector on the wane? It is likely.”

Veteran junket investor Luiz Lam believed that Macau’s junket sector has been facing “unfriendly policies” that aimed to lower the significance of the sector.

Macau’s current VIP gambling sector, which involves 85 licensed gaming promoters, had “77 gaming rooms” and “1,566 gaming tables”, Macau’s Secretary for Economy and Finance told legislators in late January.

Mr Lam said there was what he termed a public-policy “mindset” that “as mainland Chinese gamblers lost so much money here, this gave rise to various social and criminal problems”.

To “solve these problems,” the thinking seemed to be it was “best to lower the proportion of VIP gaming earnings in the city’s overall gaming income”, Mr Lam said.

Editing by Rachel Hu

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