Moody's upgrades Malta's rating for first time in 11 years

Continued improvement' of Malta's fiscal health

Credit rating agency Moody's has upgraded Malta's rating from A3 to A2 while moderating its outlook for the country from 'positive' to 'stable'.

The upgrade is Malta's first in 11 years.

Moody's said the changes were based on the “continued improvement of Malta's fiscal strength, on the back of a prudent fiscal stance and an enhanced fiscal policy framework” and Malta's strong medium-term growth prospects.

“The stable outlook on the rating reflects our expectation that government debt levels will continue to decline in coming years, although at a gradually slower pace as we also expect the growth rate of the Maltese economy to decelerate from the exceptionally high rates registered in recent years,” Moody's said.

Government debt expected to decline further

Moody's noted that Malta's debt-to-GDP ratio had been a declining trend since 2011, dropping from 70.2 per cent at the end of that year to 46 per cent at the end of 2018. It predicted a further drop to 40 per cent by the end of 2020.

It said the rapid improvement had been driven by the very strong economic growth Malta had experienced in recent years and the government's relative fiscal restraint against this backdrop of a booming economy, as a result of which fiscal surpluses had been registered since 2016.

The current rate of growth - 7.2% of GDP from 2013 to 2018 - was likely to slow “as the economy is running up against capacity constraints,

Capacity constraints, include infrastructure bottlenecks and the availability of labour and housing.

This upgrade for Malta follows closely on the heels of Fitch's outlook upgrade," said Finance Minister Edward Scicluna.

"They both confirm that Malta's economic growth model is indeed sustainable"