DBRS affirms Malta’s credit rating at A (high) with a Stable Outlook
27th July 2020
The Ministry for Finance and Financial Services welcomes another positive credit rating report published by DBRS Morningstar, following that of Fitch earlier this month, which affirmed Malta’s rating at A(High) with a Stable Outlook.
The re-affirmed Outlook reflects Malta’s strong economic and fiscal performance exhibited in recent years which has left the country relatively well placed to mitigate the risks posed by the COVID-19 outbreak. Indeed, DBRS notes that the European Commission expects the negative impact of the pandemic on Malta’s GDP to be the smallest among the Euro Area member states in 2020. DBRS expects the negative economic and fiscal impact of COVID-19 on the Maltese economy to be temporary as Malta is expected to record a strong rebound following the gradual opening of the economy and the Government’s support measures which have prevented substantial losses in employment.
According to the report, the A (high) rating is supported by Malta’s moderate level of public debt, solid external position, and households’ strong financial position, amongst other factors. DBRS also notes that Malta’s potential growth rate remains strong and is expected to converge to levels above 3 per cent in the medium term.
DBRS states that Malta’s fiscal track record and the authorities’ commitment to its medium-term fiscal target supports the fiscal rebalancing foreseen in the coming years.
DBRS positively notes that prior to the pandemic outbreak, Malta’s debt-to-GDP ratio was one of the lowest in the EU, following a period of steep reductions in this ratio. This has provided the Government with valuable room to respond to the coronavirus shock, without materially jeopardising debt sustainability. Once the pandemic effects subside, DBRS expects the public debt ratio to resume to its downward trajectory and to continue being one of the lowest in the European Union.
Malta is also expected to continue to record current account surpluses in coming years maintaining its positive net international investment position.
DBRS acknowledges the series of reforms adopted by the Government in response to the MONEYVAL and the Venice Commission report while encouraging the Government to continue to work on measures in this regard.