Reacting to the general election result of March 26, international agency Fitch Ratings welcomed the fact that this “should result in economic policy continuity”. This is especially important in view of the current international challenges, including the impact of higher energy prices and a weaker international economic outlook.
Fitch Ratings, which a few months ago confirmed an A+ rating for our country, noted that fiscal consolidation is expected to continue, with a gradual reduction in the deficit. But compared to previous assessments, Fitch analysts now think the Government will have to use the contingency reserve of 1.4% of GDP that was set up earlier. This is due to the fact that energy prices are now expected to remain elevated for longer and thus offer new fiscal challenges. Despite this, the international experts state that “we expect public debt to rise to 61.2% in 2023, below 2011’s peak of 70%, illustrating Malta’s pre-pandemic record of fiscal prudence”.
According to Fitch Ratings, Labour’s third electoral victory reflects “the government’s management of the pandemic”. This because Government provided strong fiscal support which “helped the economy bounce back in 2021, growing 9.4%”. Furthermore, they remark that “one of the world’s highest vaccination rates allowed a relatively moderate response to the Omicron variant”.
Finally, Fitch Ratings note the Government’s ambitious programme for the next five years. This is expected to lead to a lower tax rate for both families and firms, as well as better benefits and incentives. This is on top of the strong environmental investment which will reach 4.6% of GDP.