Malta retains Fitch ‘A’ rating on back of growing gaming industry and tourist arrivals

Outlook upgraded from 'stable' to 'positive' as Maltese economy outperforms eurozone peers even as GDP growth is set to moderate slightly

Malta has retained its ‘A’ rating with credit rating agency Fitch, on the back of strong public finances, strong growth and lower spending.

The country is expected to register a deficit of 1.8% of GDP in 2015, with a record high revenue reaching 42% of GDP.

The government is targeting stronger fiscal consolidation up to 2018 through lower spending, but Fitch warned these targets will prove challenging, as the risk of expenditure slippage is high.

General government gross debt will fall slightly to 47.2% of GDP. At 16.9% of GDP at end-2014, government-guaranteed liabilities are among the highest in the EU and continue to weigh on creditworthiness. Most are related to state-owned enterprises, in particular the utility company, Enemalta. “Nevertheless, after the recent purchase of 33% of its assets by a Chinese firm, Enemalta’s financial position has started to improve, thanks in part to lower energy imports and new infrastructure investment. This has reduced the risk that contingent liabilities will crystallise,” Fitch said.

“The Maltese economy will continue to outperform eurozone peers in the medium term, even as GDP growth is set to moderate slightly from 2016 onwards,” Fitch said, saying growth will be spearheaded through higher tourist arrivals and the expansion of the gaming industry.

But it said that while wages might slightly increase, Malta still retained price competitiveness.

The country's services sectors will remain the most dynamic, led by higher tourist arrivals and expansion of the gaming industry
The country's services sectors will remain the most dynamic, led by higher tourist arrivals and expansion of the gaming industry

‘Proof of the strength of Malta’s economy’

In a statement, the government noted that the three major global credit rating agencies – Fitch, Moody’s, and Standard & Poor’s – have now revised Malta’s outlook upwards in this legislature.

“Although the Opposition insists that there is no need for ongoing energy projects, Fitch agrees that they will boost the economy and render the energy sector more efficient,” it said. “Also, Fitch has predicted that real disposable income will increase, in contrast to the Opposition’s claims that people aren’t feeling the effects of Malta’s economic growth.

“Rather than austerity, this government has implemented policies of growth and investment to reduce the national debt burden.”

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