Macau’s economy is projected to “rebound by 53%” this year, assuming a recovery in gross gaming revenue to about half of pre-Covid-19 levels, said Fitch Ratings in a Thursday note.

“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