DBRS notes that the ‘A (high)’ rating is mainly supported by Malta’s strong external position, thelow reliance on external financing, the favourable public debt structure, and the households’ strongfinancial position.
DBRS acknowledges that Malta has continued to outperform the EU average growth rates with broad-based expansion. Indeed, DBRS noted that the potential GDP growth jumped from 2.5 per cent from 2004 to 2012 to 6.1 per cent from 2013 to 2018. As a result, the GDP per capita continued to converge to EU average levels in 2018.
The agency expects strong domestic demand, as well as supply factors including higher investment, increased labour supply, and enduring benefits from the energy reform to continue to support growth. The credit rating report notes that the increased labour participation rates, a rising share of less capital-intensive service sectors and a highly elastic foreign labour supply have prevented overheating pressures.
DBRS expects Malta’s debt-to-GDP ratio, which is now one of the lowest in the EU, to continue on a steep downward trend. It also expects the low debt ratio and the fiscal surplus to provide a buffer to face adverse shocks and mitigate the risks from an ageing population.
The credit rating report comments positively on Malta’s external position led by fast-growing service sector exports and which is expected to continue to strengthen.
On the financial sector, DBRS acknowledges that the Maltese financial system remains sound,underpinned by its conservative core banks’ healthy levels of capitalisation, liquidity andprofitability.
DBRS notes that based on a national risk assessment, the Government is following a strategic action plan to enhance the anti-money laundering and countering the financing of terrorism (AML/CFT), including the creation of national coordinating mechanisms, and increasing resources in this area.
Minister for Finance Edward Scicluna commented, “The year 2019 started well with the issue ofthree positive credit ratings which all have confirmed Malta’s good standing in terms of its economy and public finances when compared to its peers.”
Source: Press Release by the Ministry for Finance