DBRS confirms Malta’s long-term rating at ‘high’

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DBRS Ratings confirmed Malta’s Long-Term Foreign and Local Currency – Issuer Ratings at A (high), while it confirmed Malta’s Short-Term Foreign and Local Currency – Issuer Ratings at R-1 (middle), with “Stable” trend on all ratings, according to a press statement issued by the DBRS.

Supporting its opinion, DBRS mentions a “strong economic momentum”, boosted by year-on-year accelerating 7.5% GDP in Q3 2018, which the Central Bank of Malta’s (CBM) forecasts to reach 5.9% in 2018. Although expecting a gradually decelerating GDP for the upcoming years, DBRS still foresees it to remain high, especially compared to European peers.

“Benefiting from tax-rich economic growth, fuelled by domestic demand, strong job creation, and the impulse from its International Investment Programme (IIP), the CBM estimates Malta’s fiscal surplus stood at 2.1% of GDP in 2018. Against this backdrop, the Maltese government’s debt-to-GDP ratio could drop to 45.0% in 2018, according to the CBM,” the DBRS press statement says. DBRS expects the debt ratio to continue to decline related to the primary surplus and the favourable debt snowball effect.

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Despite an upward pressure from improving economic and public finance metrics, DBRS says Malta’s structural challenges continue to constrain the ratings. These challenges, according to DBRS, include the size and openness of the economy, external developments, including international corporate taxation or regulatory change, all of which, could negatively affect economic and fiscal variables.

“Malta’s A (high) rating is supported by its eurozone membership, strong external position, low reliance on external financing, favourable public debt structure, and households’ strong financial position. However, Malta’s contingent liabilities, stemming from its large state-owned enterprises and concentrated financial sector, and rising age-related costs are potential sources of vulnerability for public finances. Malta’s small and open economy exposes the country to external developments,” the press statement adds.

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The full rating statement can be seen on the official website of DBRS.

“The year 2019 started well with the issue of three positive credit ratings which all have confirmed Malta’s good standing in terms of its economy and public finances when compared to its peers,” Minister for Finance Edward Scicluna says about the credit rating opinion.

Founded in 1976 in Canada, DBRS is an independent, privately held, globally recognised credit ratings agency with offices in Toronto, New York, Chicago, London, Frankfurt and Madrid.

Earlier, Fitch Ratings affirmed Malta’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at “A+” with a Stable Outlook, according to a press statement Fitch recently published.