Fitch Rantings Agency has revised Malta’s economic outlook from ‘Positive’ to ‘Stable,’ while Moody’s has affirmed Malta’s A2 rating.
Fitch remarked in a statement that its revised outlook reflects the impacts of the COVID-19 pandemic, which has taken a significant toll on economies across the world.
Earlier this week, the International Monetary Fund (IMF) issued its quarterly global outlook, and projected Malta’s GDP to contract by 2.8 per cent in 2020 and to grow again by a significant seven per cent in 2021, assuming that the virus is dealt with in the second half of 2020.
The optimistic project surprised many, including the Malta Chamber of Commerce David Xuereb.
Adding to the scepticism, both Fitch and Moody’s projections, despite being somewhat optimistic, are less so than that of the IMF.
Fitch projects that Malta’s GDP will shrink by 5.9 per cent in 2020, and grow again by 3.6 per cent in 2021, remaining below 2019’s growth rate of 4.4 per cent.
The agency said the projections for 2020 are reflective of the shock to Malta’s economy when considering the impact on tourism as a result of COVID-19.
It said local consumption will provide limited cushion, on the back of increased spending in the healthcare sector.
Taking a somewhat more optimistic view, Moody’s has reaffirmed Malta’s A2 rating, with a stable outlook. It commented that while tourism remains a key sector, the economy is relatively well diversified in terms of trade partners and sectors.
In particular, the remote gaming sector and the professional services sector have grown in importance over the past years. Such sectors are not expected to be significantly affected by the pandemic, thus compensating for the sectors hit harder.
As a result, Moody’s expects the Maltese economy to contract by 3.8 per cent of GDP in 2020, but to return to a full year of growth of 3.2 per cent of GDP in 2021.
Malta Chamber President David Xuereb, reflecting the sentiment of much of the business community, commented that the IMF’s projections for Malta appear to be “understated”.
He said that “the percentage forecast is low, even by simply considering the relatively high contribution of tourism to the Maltese economy and the plausible possibility that this will be completely shut down for at least one third of the year”.