Fitch reiterates Malta’s strong A+ credit rating

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.

Should you require any further information in this respect, please do not hesitate to get in touch with our experts.