Fitch Ratings has affirmed Malta's long-term foreign-currency issuer default rating at A+ with a stable outlook.
“Malta's GDP per capita has increased gradually since 2010 and accounts for an estimated 145 per cent of the 'A' median in 2018. Malta's A+ IDRs reflect the following key rating drivers: Malta's ratings reflect its high income per head compared with the 'A' median, robust economic growth and a large net external creditor position, together with eurozone membership,” Fitch’s report stated.
“Malta's ratings are constrained by the small and highly open nature of its economy, which makes it vulnerable to external shocks and its high, albeit declining level of contingent liabilities and outsized banking sector relative to GDP.”
Fitch predicted that Malta will maintain a fiscal surplus of 1 per cent of GDP in 2018, after outperforming its fiscal target by 3.1pp in 2017 with a surplus of 3.9 per cent of GDP due to large tax revenues and proceeds from the Individual Investor Programme (IIP) and lower than expected capital expenditure.
Real GDP growth is set to remain robust at 5.6 per cent in 2018, supported by a strong growth in public and private consumption and recovery in investment.
“We forecast the current account surplus to decline in the forecast horizon to 10.9 per cent of GDP in 2018, from 13.7 per cent in 2017 as investments in housing, health and education ramp-up and good imports pick-up.”
Fitch remarked on risks to the sector stemming from the high and rising exposure to the housing market, with mortgage lending accounting for 48.3 per cent of the total lending to residents. It also warned that Malta's Ease of Doing Business is weaker than the 'A' median, ranking 84th out of 190 in 2018, and that the “rule of law" sub-component of Malta’s World Bank governance indicators was on a declining trend.