Malta retains A high rating with a stable outlook

The world’s fourth largest international credit rating firm, DBRS Morningstar, has confirmed that Malta retains its A high rating with a stable outlook. This remains the best credit rating to be awarded to our country by this agency.

In their renewed assessment, the international financial experts explained that the stable trend they assigned “reflects DBRS Morningstar’s view that Malta’s high economic growth rates and fiscal surpluses prior to the Coronavirus Disease (COVID-19) shock have supported its private and public sector’s capacity to soften the pandemic setback and mitigate the risks to the ratings.”

In fact, they noted that “Malta’s economic performance prior to the pandemic was remarkable, permitting the private sector to enter the crisis in a strong position”. This strong position was essential to enable the undertaking of measures that are leading to Malta’s recovery progressing strongly. The DBRS report underlines that economic reopening has resulted in “a strong rebound in private consumption and investment in 2021”. So much so that unemployment is now even below pre-pandemic levels – something that confirms the strength of the economic rebound.

Malta’s economic performance before COVID was remarkable, permitting the private sector to enter the crisis in a strong position.

This is evident from the fact that in the first three quarters of 2021, Malta’s real GDP grew by nearly 8%. The international experts point towards toward three causes for this: “Malta’s high vaccination coverage, a gradual return of foreign tourism, and continued fiscal support”.

While many are fearing the potential economic impact of the Omicron variant, DBRS experts were quite reassuring in their assessment noting that “Malta’s high vaccination rate and improved adaptability to the pandemic environment should mitigate the risks”.

Similarly, the report states that “DBRS Morningstar takes the view that no significant or discernible impact on the real economy has materialised thus far as a consequence of the decision of the Financial Action Task Force’s (FATF) decision in June 2021 to include Malta on its list of countries under enhanced monitoring”. So much so that the international experts note that the financial and gaming sectors are still posting strong growth rates.

As for the running of public finances, the analysis is exactly the opposite of that made by Opposition spokespersons. While they note that the fiscal deficit is due to the pandemic, arguing that it was “critical to mitigate its impact”, they argue that this administration’s track record mitigates risks. The international experts state past performance “provided the government with valuable room to respond to the coronavirus shock without materially jeopardising debt sustainability”.

In addition, they say that “DBRS Morningstar takes the view that the stronger-than-anticipated growth in fiscal revenues could offset the potential introduction of additional measures to shield the private sector from the surge in energy prices”. Essentially, these experts believe that given its track record, this administration is also able to counter the new inflationary challenge that is emerging overseas.

No significant or discernible impact on the real economy has materialised thus far as a consequence of the FATF decision.

Lauding Malta’s fiscal prudence, the report expresses its confidence that the government will “gradually return to a stronger fiscal position over time as the pandemic effects wane and the economy recovers to full potential”. The public debt ratio remains manageable – another completely different assessment from that made by the Opposition. period of steep reductions.

The report concludes that Malta has a “stable policy environment”. DBRS experts emphasise that “the Maltese authorities have made significant progress to improve the governance and institutional framework in recent years, rebalancing the power of the Prime Minister, the President and the Judiciary, which previously was more concentrated in the figure of the Prime Minister”. They praise the reform of the appointment/removal procedures for judges and magistrates, the split of the Attorney-General’s prosecution and advocacy roles, and reforms to the police force. 

Finally to reassure investors, the report notes that while “General elections are scheduled to take place during 2022….DBRS Morningstar currently does not expect a significant shift in economic or fiscal policy as consequence”. Luckily Malta seems set to continue progressing economically and socially, continuing to build a new prosperity.

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