Fitch attributes the upgrade to Malta’s robust economic growth, positively noting that in 2018 Malta was the fastest growing economy in the European Union (EU). The fiscal surplus recorded in the last three years coupled with a falling debt-to-GDP ratio were also key drivers for this upgrade.
“The positive result by Fitch complements the European Commission’s Summer Forecast. Both reports conclude that Malta’s high economic growth is expected to be sustained in the medium-term while public finances are expected to continue on a sound footing”, comments Minister for Finance Edward Scicluna.
Going forward, Fitch expects the Government to record an increasing surplus in the next two years despite the forecasted decline in revenue from the IIP. It also expects the recent track record of a falling debt-to-GDP ratio to be maintained.
Domestic demand is expected to be the made driver of real GDP growth, fuelled by strong labour market dynamics. Modest wage growth will bolster disposable incomes and support resilience in household consumption growth, with few signs of overheating in the economy. Fitch expects investment activity to remain high, supported by the absorption of EU structural funds.
On the external sector, Fitch notes that despite the slowdown in the Eurozone, Malta’s current account remained strong. It further expects the current account to continue to record healthy surpluses in the coming years.
Fitch acknowledges Government’s efforts to strengthen supervisory and regulatory institutions, noting that supervisory resources at both the FIAU and MFSA are increasing, with budget and hiring staff being prioritised.
Press Release by the Ministry for Finance