Minister for Finance Prof. Edward Scicluna welcomes the latest credit rating report issued by DBRS Ratings Limited which confirms Malta’s long-term foreign and local currency issuer ratings at A and the short-term foreign and local currency issuer ratings at R-1 (low). It also re-affirms a Stable trend on all ratings.
DBRS acknowledges the strong economic growth recorded in 2015 supported by domestic demand, which in turn is fuelled by robust increases in private consumption and investment. It acknowledges that the reductions in the personal income tax coupled with favourable labour market conditions supported private consumption, while investment was boosted by the large-scale investment projects such as the construction of the new gas power plant.
On the fiscal front, DBRS states, “Important improvements in fiscal management are in progress, after weak fiscal performances in the past” while, “Public expenditure overruns and weak internal controls have been common.” It positively notes: “Measures undertaken in line with the European Stability and Growth Pact have enhanced fiscal institutions, and the budget deficit has declined.” DBRS also notes how this Government strengthened the overall fiscal framework by adopting the Fiscal Responsibility Act. It further states that the restructuring of some of the State Owned Enterprises (SOEs) such as Enemalta and Airmalta has reduced risks to the public sector balance sheet.
DBRS acknowledges the pension reforms emanating from the 2016 Budget directed towards ensuring the sustainability of the public pension system although it welcomes further reforms in this area. Similarly, it acknowledges the major improvements from recent reforms efforts directed towards increasing labour market participation.
On competitiveness factors, DBRS comments that unit labour costs fell in 2015 after growing above average since 2007, while real output growth per person has been improving, after weak growth over the past decade.
DBRS also comments positively on Malta’s external position which it remarks reflects the current account surplus and a relatively large positive net international investment position.
Minister for Finance Prof Edward Scicluna remarks: “It is quite encouraging to note that another independent renowned credit rating agency is acknowledging the policy efforts by this Government directed towards ensuring economic and public finance sustainability.”