In the aftermath of the FATF decision, the Opposition had declared the end of Malta’s economic prosperity. Yet since then, three major institutions, namely the IMF, the European Commission and the Central Bank revised upwards their already rosy economic projections, with growth rates at one and a half times those forecast by Government. Similarly, Moody’s, DBRS, and Fitch, one after the other confirmed their rating of the Maltese sovereign.
Now it was the turn of S&P Global Ratings to join their ranks. Thus, our country will continue to enjoy an A- rating with stable prospects, which is the best rating for our country in the last decade. By contrast in the aftermath of the 2009 recession, which was completely mishandled by the Nationalist Government of the time, S&P did not just downgrade Malta’s rating once, but even did it twice, sending our rating plummeting below the coveted A category into dreaded BBB territory.
The reason why S&P experts this time round took the decision to maintain our country’s rating was that they concluded that “Malta will contain the long-term adverse effects of the COVID-19 pandemic on its economy and budgetary position thanks to an effective policy response”. Just a few days before, the Opposition’s “experts” were quoted as stating that instead of “Prime Minister Robert Abela’s claim last March that Malta would hit the ground running, the party observed that instead, Malta was going in reverse.”
As has become usual since the advent of Bernard Grech, the Opposition’s economic analysis simply beggars belief. So much so that while the Opposition incredibly claims the Maltese economy is going in reverse, S&P Global Ratings forecast a 5% growth rate this year and nearly 6% next year.
Malta will continue to enjoy an A- rating with stable prospects, which is the best rating for our country in the last decade.
Standard & Poor’s experts contradict Opposition statements
Now compare these two statements.
“The fact that the Maltese economy has shrunk in the second quarter is of concern when one keeps in mind that the first months of the year saw the government deficit reaching record levels, and public debt growing faster than other EU countries. This is a confirmation of the inefficiency and incompetence in the country’s financial management, with a failure to attract new economic sectors and undermining trust with decisions that led to the FATF greylisting.”
“The government’s countercyclical policy measures have prevented widespread business closures and job losses since the start of the pandemic and are supporting the economic rebound…..Malta’s sizable fiscal policy response underpins economic recovery prospects, supporting the decline in the government debt-to-GDP ratio from 2023.”
Two alternative realities. The first: the doom and gloom negativism of the Opposition. The second: the independent and technical analysis of S&P Global Ratings’ economists. While the Opposition criticizes the measures taken by the Government and says they are pushing the country in reverse, seasoned international experts deem them essential and if anything, warn that Government should not remove support until the recovery has gathered steam.
The Opposition is clearly still completely devoted to its pre-2013 philosophy of austerity. Malta was the only country in Europe to reduce its deficit in the wake of the 2009 recession. A decision that destroyed the backbone of our economy and in doing so continued to widen the deficit instead of reducing it. By March 2013, our national debt had soared to 70% of GDP, when now despite all the stimulus and support measures granted by Government, S&P project it will remain below 60%.
Quoting again S&P: “In line with our anticipation of a strong economic recovery and the corresponding withdrawal of these temporary measures, we project that the budget deficit will narrow steadily to 1% of GDP in 2024. According to its latest stability program update (April 2021), the government plans a slower budgetary consolidation, with a deficit of 2.9% of GDP in 2024. Our forecast differs from the government’s because we factor in higher economic growth and the corresponding cyclical impact on government revenue.”
S&P Global Ratings experts are so convinced of the success of the Government’s economic policy that they are making much more positive predictions than the Government itself. So much so that the deficit in 2024 could be one third of what the Government is projecting. This is because they feel that the Maltese economy, thanks to fiscal support, will grow much more than the Government thinks and this will lead to more revenue.
Instead consider this alternative reality from the Opposition: “Government has lost control of its finances, Opposition MP Mario de Marco said as he noted the sharp increase recorded in both the country’s deficit and debt.”
The Opposition’s analysis flies in the face of that of international experts. Their policy recommendations, carbon copies of the disastrous 2009 economic response, are the exact opposite of what eminent institutions point towards. While Government policies continue to be praised by all and sundry, the Opposition persists with its endemic negativism.
And while this happens, there are some who are still puzzled as to why the Opposition’s own ratings continue to be downgraded by the electorate.