Fitch cites Malta’s strong rule of law as contributing to A+ rating

The strong rule of law and governmental effectiveness in Malta were strong contributors to the country’s A+ sovereign rating, credit rating agency Fitch said today.

Following in the wake of Moody’s and DBRS, which upgraded Malta’s rating last week, Fitch affirmed Malta’s rating at A+ resulting from its upgrade last year, while commending Malta’s high governance indicators.

Finance minister Edward Scicluna said he was pleased to see a rating agency stating that house prices still appeared to be in line with fundamentals and that it still believed there were strong mitigating factors against potential instability stemming from the housing sector.

The independent rating agency forecasts Malta’s economic growth to outperform that of similarly related peers in 2018. Real GDP grew by 7.2 per cent in the first three quarters, boosted by buoyant service exports and sharp contraction in imports.

Malta’s service exports and a moderation in import-intensive investments will support a robust external fiscal position.

The shift to a more service-oriented and a less investment-intensive economy will lead to a sustained surplus on the current account at an average of 9.7 per cent of GDP in 2018-2019.

Fitch also forecasts that Malta’s general government balance is to remain in a surplus of 1.5 per cent of GDP in 2018. In addition, the report outlines that Malta’s debt ratio is decreasing, supported by high nominal GDP growth and expected fiscal surpluses.  Indeed, Fitch expects Malta’s debt-to-GDP ratio to keep falling to 45.1 per cent of GDP by end-2019.

The credit rating report acknowledged Malta’s low unemployment rate, which is among the lowest rates in the eurozone. It also underlines that the rate of inflation has been lower than the ‘A’ median while national income per head is higher than the ‘A’ median.