Standard and Poor's affirms Malta's positive rating

The Ministry for Finance has welcomed the latest credit rating report by Standard and Poor’s which affirmed Malta’s A-/A-2' ratings with a positive outlook.

Minister for Finance Edward Scicluna said he was pleased to note that Standard and Poor’s was “attributing Malta’s exceptional economic performance to the Government’s economic, fiscal, and social policies and the undertaking of reforms. The Government intends to continue along this successful path as promised in its electoral programme”.

Standard and Poor’s acknowledged that in recent years, the Government had consolidated government finances, reduced general government debt relative to GDP, and undertaken several structural reforms, notably those that have increased female participation in the labour market and reduced the country’s energy bill.

A government reaction to the report states that the positive rating “reflects Malta’s strong growth performance, the recurring current account surpluses driven by Malta’s large services exports, and the improving general government budgetary position and fiscal management.”

Standard and Poor’s noted that significant investments in energy and logistics were important contributors to growth in 2014 to 2016, while growth in the exports of services such as tourism, logistics, and e-gaming are expected to continue fuel growth in the coming years the Ministry of Finance said in a statement, adding that in 2019, it expects growth to moderate but to exceed that of peers at similar income levels and stages of development.

The report noted that the implementation of recommendations from spending reviews, the fast pace of growth of new economic sectors, and increases in government revenues have allowed the consolidation of public finances. It further projects that, with recurrent fiscal surpluses, the debt-to-GDP ratio will decline to under 40 per cent in 2021 from a projected 47 per cent in 2018.

With regards to the banking sector, the report noted that domestic banks were highly liquid and possessed a low loan-to-deposit ratio.

Standard and Poor’s acknowledged that macroeconomic policymaking will remain geared toward further fiscal consolidation and noted that efforts to further reform state-owned enterprises, reduce skill mismatches, and improve the long-term sustainability of public finances would be implemented gradually, alongside increased public investment to plug infrastructure gaps.