Following the positive initial signal sent by an authoritative press release issued just after the FATF decision on Malta, the international credit rating agency DBRS Morningstar has now confirmed our country’s rating as A (high) with a stable outlook. This means that Malta continues to enjoy the best credit rating ever awarded to it by this agency back in February 2018. This is in stark contrast with what has happened to several other countries. Since the pandemic started, DBRS has downgraded the rating of economic giants such as France and the UK. Yet, its reckoning of Malta’s standing remained resilient.
The agency’s experts give one important reason for this, namely that “Malta’s strong economic and fiscal track record prior to the Coronavirus Disease (COVID-19) shock offsets the risks to the ratings”. DBRS note “Malta’s recent progress on improving its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework”. They also laud the importance that the current administration is giving to resolve any lingering shortcomings. In fact, they remark that “Prime Minister Robert Abela has provided a new impetus to strengthen the rule of law since coming into office in January 2020”. Our successful track record is hence bolstered by trust in the reforming zeal of a Prime Minister committed to address any shortcomings while maintaining the progressive policy direction of past years.
Malta’s strong economic and fiscal track record prior to the Coronavirus Disease shock offsets the risks to the ratings.
When confirming Malta’s rating, the international agency refers to the commendation of Malta’s reforms by the Venice Commission, while also mentioning positively the result of the MONEYVAL assessment. In the latter respect, they note that “MONEYVAL’s favourable assessment of Malta’s AML/CFT framework recognises the significant improvement in its level of compliance with FATF’s standards due to positive legislative, regulatory, and institutional reforms from authorities”.
Rather than the doom and gloom spread by the Opposition, DBRS’ analysts said that it is not certain what economic impact the FATF decision might have, and that in any case should the Government continue on its current reforming path, any effect will be limited and quickly mitigated. Instead of labelling Malta as some sort of failed state, as is frequently done by the Opposition, the DBRS experts remind readers that “the World Bank’s governance indicators for Malta are broadly in line with those of the EU average”.
The DBRS report notes that Malta was hit by the pandemic following a “prolonged period of strong economic and fiscal performance” which has contributed to business resilience while allowing Government to provide strong fiscal support. Although this support has widened the deficit, the international experts believe that the government’s financial situation will improve rapidly.
The reason for this is that DBRS economists argue that this year the Maltese economy is expected to be driven by domestic demand. This reflects the success of government support to counter the shock of the pandemic on unemployment. They also see as a key factor behind the economic recovery Malta’s remarkable pace of vaccination, which is expected to attract back tourism, while allowing remaining restrictions to be lifted. In addition, the report argues that the use of European funds is capable of improving our country’s economic performance even more than anticipated in their projections.
Coming at the heels of a European Commission report that upgraded Malta’s GDP growth by twice the EU average revision, the confirmation of Malta’s A (high) rating is very good news. It confirms that the current very high levels of business confidence observed in Malta are well warranted. In coming months, Malta’s economic rebound is set to consolidate and create new opportunities for families and businesses alike.
