DBRS confirms Malta's 'A' rating despite 'recent political turbulence'

The Dominion Bond Rating Service, the Toronto global credit rating agency, has confirmed Malta's 'A' rating for its continued economic success despite "recent political turbulence."

The rating agency said that Malta's economic performance was "extremely strong" between 2013 and 2019 with average GDP growth at an estimated 7%.

"This has attracted both foreign labour and capital to Malta, complementing its favourable tax environment and reinforcing the positive economic dynamic. On the back of a buoyant economy and fiscal prudence, Malta´s public finances have improved," DBRS said in a statement on Saturday.

The fiscal surplus stands at 1.5% of the GDP and the debt-to-GDP-ratio was 42.8% the GDP in 2019. 

"Despite a weaker external backdrop and the recent political turbulence, DBRS Morningstar expects Malta to continue to grow at a solid pace and continue to post fiscal surpluses in the coming years."

Despite this, the rating agency said that the Malta economy, with sectors such as tourism, gaming, and financial services, remains highly reliant on external demand and foreign capital. In the medium term, potential changes in international corporate taxation, changes to the EU regulatory framework, or weakening perception of the governance framework could reduce Malta’s attractiveness to foreign companies.

DBRS praised Malta's economic performance as "remarkable" with growth that has been broad-based and well above the 2.1% average rate between 2004 and 2012.

"On the back of economic momentum that remains very strong, the government projects a headline surplus of 1.4% for 2019 and 2020. Encouragingly, the government aims to sustain the fiscal surplus above 1% of GDP until at least 2022, while sustaining high levels of public investment to deal with increasing infrastructure bottlenecks," DRBS said, adding that predictions were appropriate.

DBRS also predicted that the public debt ratio will continue to fall in the coming years.

"This January, a new Labour Party government was appointed led by Robert Abela, who has pledged economic policy continuity and further steps to strengthen governance in the country."