International agency Fitch Ratings has confirmed as “stable” the credit rating of A + awarded to Malta last August – the first time it has upgraded our country in a decade.
In their report, Fitch Ratings predict that Malta will end last year with a growth of 7% as opposed to its forecast of six months earlier of just over 4%. This upward revision reflects the country’s better than expected performance in the balance of international payments.
For this year Fitch Ratings predicts 5.9% growth for the country, almost double the growth observed in other countries with a similar rating. In their previous report, Fitch Ratings were predicting a 3.7% growth in 2018.
The upward revision in the forecast is due to several factors. Among others the Fitch Ratings report states that ” domestic demand will remain strong with declining unemployment and increase in wages pushing up private consumption “, while exports, especially services, are expected to continue to gather momentum.
Fitch Ratings predicts that the Government is expected to have a surplus in public finances higher than forecast in the last Budget. The report says that “the fiscal surplus is likely to outperform the government’s initial target of 0.6% of GDP in 2017 and is now estimated at 2% of GDP “. It is expected that this year our country will have a surplus of 1.5% of national wealth, compared with a 1.8% deficit in countries with a rating similar to that of Malta.
Fitch Ratings also said that improvement in public finances is due to structural changes. Among others mentioned, it states that the social cost is under control while “savings from ongoing comprehensive spending reviews ” were made. Therefore, the national debt is “on a firm downward trajectory supported by high nominal GDP growth and ongoing expected fiscal surpluses“, so that by 2019 it is expected to fall to 45% of the national wealth, compared to the average of 47.5% in countries with similar rating to Malta.
This positive report by Fitch Ratings shows that not only our country has achieved a higher rating than it had in previous years, but now has economic and financial results which are significantly better than those of countries with the same rating. This should lead to more interest from foreign investors resulting in a stronger economy.