“The structural reforms and prudent fiscal policies implemented by the government over the recent years have contributed towards another positive credit rating for our country. Fitch affirmed Malta’s rating at ‘A+’ with a stable outlook. This continues to put minds at rest that the country can optimistically keep on looking forward”, said Minister for Finance Edward Scicluna when welcoming the report.
Fitch highlights that Malta’s ratings are reflecting a high income per head, a robust economic growth, and a large net external creditor position.
Fitch explains that Malta’s real GDP growth is set to remain robust at 5.6 per cent in 2018, sustained by strong growth in consumption and a recovery in investment.
The credit rating agency expects Malta’s fiscal policy to remain prudent and forecasts a fiscal surplus of 1 per cent of GDP in 2018, net of IIP.
Through the report, Fitch acknowledges the decline in contingent liabilities in 2017. Fitch also notes that public debt dynamics are very favourable, with low interest payments, strong nominal growth, and recurrent primary surpluses leading to a sustained downward trend in the debt-to-GDP ratio. Fitch expects the debt-to-GDP ratio to continue declining to 40.9 per cent by 2020, comparing favourably with similarly rated peers.
The report indicates that in May 2018, unemployment declined further, reaching 3.9 per cent, which is among the lowest rates in the eurozone. Nevertheless, inflation is expected to remain contained as a result of the strong inflow of foreign workers and rising labour participation, through which sharp increases in wages are prevented.
Exports are expected to continue to be robust supported by the strong performances of the gaming, tourism, and financial services sectors.
Fitch notes that Malta’s banking sector remains sound while asset quality is improving as non-performing loans have been declining in recent years.