The latest credit opinion by Moody’s Investor Service has affirmed an A3 Rating for Malta with a positive outlook. Moody’s highlighted Malta’s sustained progress on public sector debt reduction and the prospects for further fiscal consolidation on the back of a buoyant economic performance. The rating agency points out that it will upgrade the rating for Malta to A2 if the improvement in fiscal strength is sustained.
Moody’s notes Malta’s recent track record of strong economic growth, an elevated per-capita income and very high scores in terms of global competitiveness. While its small size and openness make it susceptible to external shocks, Malta is able to weather such storms due to the high level of competitiveness as well as elevated wealth levels.
Malta’s institutional strength is deemed ‘High’ by Moody’s, reflecting the country’s robust policy framework, enhancements to institutions and policymaking framework of public-sector entities.
Moody’s acknowledges that Malta’s fiscal consolidation efforts are bearing fruit as the fiscal surplus is expected to hover around 2.5 per cent in 2018 and 2019. This, coupled with strong economic growth, will continue to contribute towards a rapid reduction of Malta’s debt-to-GDP ratio according to Moody’s.
The rating agency considers Malta’s susceptibility to event risk, stemming from the banking sector primarily, as ‘low’, based on the relative size of the sector in the economy and the financial soundness of the domestically oriented institutions, amongst others.
Moody’s notes that despite the tightening labour market, increased foreign workers and higher female participation in the labour market contained the wage growth.
The report explains that while growth, is expected to moderate from recent highs, it notes that Malta’s economic growth will remain strong in both 2018 and 2019.