Asian Economic News: Moody's says Macao reliance on gambling affects credit rating

HONG KONG, Jan. 12 Kyodo

Macao's over-dependence on gambling income is the most negative factor affecting the territory's credit rating, Moody's Investors Service said Wednesday.

The U.S.-based credit-rating agency put Macao's long-term foreign currency country ceiling at Baa1 and its outlook stable.

The rating is based on Macao's debt-free status and smooth transition to Chinese rule at midnight Dec. 19 following 442 years of Portuguese administration, Moody's said in its annual report on the enclave.

But the agency said Macao's reliance on foreign exchange income derived from gambling and related tourism, which occupies more than 50% of the territory's revenue, affected the credit rating.

Macao also depends heavily on the textile and garment industry for its merchandise exports, it noted.

In 1998, 85% of Macao's exports were textile and garment goods.

Moody's said such dependence could be changed under the new Macao administration.

Yet the agency does not expect Macao's return to China will have a significant impact on the enclave as its political and economic structures will remain basically the same.

"Over time, the ratings (of Macao) could possibly be affected by changes in the situation in China and Hong Kong," the report said.

Macao could improve its revenue performance in the next few years if recovery in Asia, especially Hong Kong, continues, it said.

Macao saw slight fiscal deficits for the past two years.