Spinola Malta

German credit rating agency Scope has released its latest credit report for Malta, re-confirming its A+ rating while maintaining the country’s stable outlook.

Identifying some key strengths in the country’s outlook, it argues that Malta has “strong growth potential, prudent fiscal performance and a robust external position”.

The Stable Outlook, the agency says, reflects its view that the risks Malta faces over the next 12 to 18 months are “well balanced”. 

“The country’s economy and fiscal metrics are expected to recover in 2022 with debt returning to a downward trajectory within the forecast horizon”, it reports.

Discussing the constraints in Malta’s financial outlook, it identifies “an externally dependent and resource contained economy which presents risks to the stability and sustainability of Malta’s growth model” as one of three weaknesses.

Additionally, Malta faces “fiscal risks” in the form of “age-related” cost pressures and raised Government guarantees issued to state-owned enterprises, and “lingering, albeit improving” institutional challenges “relating to its financial oversight and supervision frameworks and the deteriorating governance metrics”. 

Explaining the rationale for its A+ rating,  the agency explains that Malta has experienced “very robust” economic growth in recent years, achieving annual growth rates of 6.5 per cent from 2015-2019, “making it the EU’s fastest-growing economy after Ireland”. 

This strong economic expansion has been supported by growth in the “e-gaming, professional services and tourism sectors” as well as structural reforms aimed at improving the labour supply, among others, Scope comments.

In the more immediate future, the agency acknowledges that “while the COVID-19 crisis has led to a substantial decline in output of seven per cent in 2020, Scope expects a robust recovery from H1 2021 onwards”. 

The GDP decline in 2020 was “mostly driven” by net exports and, to a lesser extent, domestic demand, it finds. “Timely and forceful Government support measures helped to mitigate the adverse impact of the health crisis on the economy”, the organisation posits. 

Malta’s Government has welcomed the Scope report, saying the agency highlights “positive reform momentum under the current administrations”.

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