Malta’s high DBRS rating safe for now, but energy crisis clouds outlook

Malta has retained its A (high) sovereign credit rating with a stable outlook, according to Morningstar DBRS, as strong economic performance and fiscal improvements continue to support the country’s credit profile.

Short-term ratings were also affirmed at R-1 (middle), with the agency noting that risks remain broadly balanced.

Growth slows but remains strong

Malta’s economy expanded by 4.0 per cent in 2025, a slowdown from 6.2 per cent the year before but still a comparatively strong performance.

The slowdown reflects softer private consumption, alongside weaker goods exports, particularly in sectors such as semiconductors. However, services remained a key driver, with tourism continuing to perform strongly.

According to projections by the Central Bank of Malta, growth is expected to stabilise at around 3.7 per cent in 2026 and 2027, supported by domestic demand and planned tax cuts.

Energy shocks pose key downside risk

The report highlights growing uncertainty linked to global energy markets following recent geopolitical developments.

While Malta’s fixed energy pricing policy shields households from direct price increases, it shifts the burden onto public finances. Higher global energy prices would likely translate into increased government subsidies.

Indirect effects are also expected, with higher import costs pushing up prices for goods such as food and manufactured products.

Deficit narrows on strong revenues

Malta’s fiscal position has improved, with the deficit narrowing to around 3.0 per cent of GDP in 2025.

This has been largely driven by strong tax revenue growth, particularly from corporate income tax, which has exceeded expectations in recent years.

Further reductions in the deficit are projected, although planned tax cuts and potential increases in energy subsidies could limit the pace of consolidation.

Debt remains manageable

Government debt stands at around 46.5 per cent of GDP, remaining below levels seen in many euro area countries.

This provides the government with room to respond to economic shocks, although the cost of servicing debt is expected to rise slightly in the coming years.

Banking sector strong but property exposure flagged

Malta’s banking sector continues to show strong capital and liquidity positions, with low levels of non-performing loans.

However, the concentration of lending in the real estate sector remains a concern, with over 70 per cent of loans linked to property-related activities.

External strength offsets structural vulnerabilities

Malta continues to run a strong current account surplus, supported by services exports such as tourism and remote gaming.

At the same time, the economy’s small size and openness make it vulnerable to external shocks, particularly shifts in global demand.

Governance remains under scrutiny

While Malta benefits from a stable political environment, the report notes that further improvements in governance and institutional effectiveness would strengthen the country’s credit profile.

Ongoing efforts to enhance anti-money laundering frameworks remain a key factor in maintaining international confidence.

Balanced outlook

Morningstar DBRS maintains that Malta’s rating outlook is stable, with potential for upgrades if fiscal and economic resilience strengthens.

However, risks remain tilted to external developments, particularly energy markets and global growth conditions, which could impact both economic performance and public finances in the coming years.