In a recent credit rating report, Fitch affirms Malta’s A+ credit rating with a stable outlook, underscoring the nation’s resilient economic foundation while acknowledging fiscal challenges.
Malta’s economy has shown remarkable recovery, surpassing pre-pandemic GDP levels by 17% as of Q4 2023, a significant leap from Fitch’s initial forecast. The resurgence was fuelled largely by the tourism sector, witnessing a resurgence in arrivals exceeding pre-crisis figures by over 8%.
The agency predicted that Malta’s GDP will expand by 4.1% this year and 3.7% the following, with growth in previously fast-growing industries like online gambling calming down.
Unemployment rates are projected to remain low at 2.8%, down from the pre-pandemic 4.1%, fostered by an influx of foreign workers that stabilises wages and sustains economic growth while mitigating costs associated with an ageing population.
While the fiscal deficit is on a narrowing trajectory, dropping to 5% from 5.6% in 2023, it remains higher than comparable A-rated nations due in part to substantial energy subsidies, representing 1.3% of GDP. Fitch underscores the necessity for an exit strategy from these subsidies to mitigate fiscal risks amidst potential global energy price escalations.
According to Fitch, there is a challenge associated with the tax adjustments that are in line with the EU’s Minimum Tax Directive; however, Malta has bestowed a six-year transition time to implement a minimum 15% effective tax rate for enterprises.
Despite a manageable debt situation below the EU’s threshold at 54.0% of GDP in 2024, Fitch stresses the importance of enhancing economic diversification as one of the key factors for a potential credit rating upgrade.
The banking sector in Malta is lauded for its resilience, marked by strong capitalisation, a minimal ratio of non-performing loans, and a robust liquidity coverage ratio, positioning the nation favourably within the EU financial landscape.
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Thomas Jacobsen |
Szabolcs Toth |