German rating agency, Scope Ratings, has reaffirmed its best rating for Malta: A+. This decision was based on three factors, namely our country’s strong growth potential, our record of prudent fiscal management and our strong external position.
The German experts note that “GDP growth reached 9.4% in 2021, a much stronger performance than anticipated and placing Malta among the fastest recovering EU economies outperforming growth expectations.”
In their assessment, Scope Ratings argue that “Malta has managed to limit the structural impact of the COVID-19 crisis” and “so far, the country has been relatively well insulated from the effects due to the war in Ukraine, given limited direct economic linkages with Russia and Ukraine and limited inflationary pressures thanks to forceful government intervention”. Compared to other European countries, “Malta was able to contain the unemployment rate during the pandemic…amongst the lowest levels in Europe, thanks also to the effective assistance measures from the government such as the Wage Supplement scheme, which mitigated the economic consequences of the pandemic”. As a result, Malta is considered to have a strong growth outlook.
GDP growth reached 9.4% in 2021, a much stronger performance than anticipated.
Another important factor underpinning Malta’s A+ rating is its commitment to prudent fiscal policy. This enabled government to support the economy during the pandemic. Moreover, the German experts welcome the fact that “the government’s medium-term budgetary strategy balances the need to provide discretionary support for the economic recovery and return public finances to a sound footing longer-term”.
While the Opposition argues that Government has lost control of public finances, there is no hint of criticism on the part of Scope Ratings. Instead, they expect the debt ratio to stabilise and remain sustainable. They base this on their expectation of “strong growth prospects and the renewed commitment to fiscal discipline”.
Aside from economic and financial considerations, the German agency also notes that “the Maltese economy is the least carbon intensive among peers and has achieved one of the greatest reductions in carbon intensity among EU countries, lowering its carbon intensity from above EU average levels in 2005 to one of the lowest levels across the EU in 2019”. This was due to the move away from the use of heavy fuel oil. Scope Ratings also remark that “forceful social policies, combined with broad based growth has helped improve social conditions substantially in Malta” and “in addition, the country benefits from good levels of social cohesion and civic engagement”.
The German experts note that “reforms to enhance the rule of law and governance have been implemented in 2020, and additional reforms under the forthcoming government are expected”. The report also notes the good progress made on reforms needed so that Malta no longer features on the FATF’s additional monitoring list of jurisdictions.