The Ministry for Finance welcomes the latest sovereign rating issued by the German credit rating agency, Creditreform Rating, which upgraded Malta’s outlook to positive from stable, with an A+ overall rating.
The upgrade reflected Creditreform’s expectation that, Malta will continue to show a strong growth performance with real GDP remaining solid over the next few years, the Maltese labour market will continue to evolve favourably, and the debt-to-GDP ratio will remain on its firm downward path, supported by resilient economic growth and sustained primary surpluses.
“I am very pleased to hear Creditreform confirming once again the two main drivers; ‘exceptionally strong economic activity’ and ‘significant headway in fiscal consolidation’. As a government we are determined to maintain them,” stated Minister for Finance Edward Scicluna.
Indeed, Creditreform commended Malta’s favourable macroeconomic performance which is underpinned by relatively high per capita incomes and buoyant economic growth supported by the well-performing labour market. Creditreform expects growth to continue to outpace most other EU-28 members at 4.9 per cent in 2019 and 4.1 per cent in 2020.
Private consumption, which hit the highest growth rate in Eurostat records in 2018, is set to remain the most important growth pillar. It is expected to be buttressed by continued employment growth. Gross fixed capital formation is also expected to be conducive to growth this year and next, benefiting from large private and public tourism, real estate, and healthcare projects.
Wage growth is expected to be sustained, while inflationary pressures are expected to remain moderate in the near term, with positive ramifications for households’ purchasing power.
The credit rating report assesses Malta’s institutional quality as generally high. It also acknowledges the ongoing government efforts to address the identified shortcomings in the IMF FSSA and the Moneyval report. Indeed, it positively notes legislative amendments being undertaken aimed at strengthening the MFSA’s efficiency and effectiveness and the detailed action plan implemented by the FIAU to enhance its supervisory functions and procedures. Moreover, it also acknowledges that the authorities announced a set of measures including the creation of a new agency dedicated to investigating and prosecuting the most serious cases of ML and financial crime, as well as the separation of critical functions of the Attorney General.
Creditreform note that accelerating judicial procedures remains a work in progress. Nevertheless, it acknowledges the government’s efforts to reduce the time needed to resolve civil, commercial and administrative cases, noting positively that in 2017 the time needed to resolve such cases was reduced to less than half the time needed in 2010.
Creditreform continue to view Malta’s public finances as a credit strength given the moderate debt level, favourable debt trend, and prospects of improving debt affordability. Indeed, it expects public finances to remain healthy in 2019 and 2020, with a moderate fiscal surplus reflecting softer but resilient economic activity and government plans to address structural bottlenecks and foster more inclusive growth.
Thanks to robust nominal GDP growth, declining interest expenditure, and sound fiscal policies, gross debt is expected to fall below 40 per cent of GDP by 2021 at the latest.