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Investing.com -- Fitch Ratings has confirmed Malta’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’A+’ and maintains a Stable Outlook. The rating affirmation is supported by Malta’s strong economic performance, high per capita income, and its membership in the EU and euro area. These strengths are offset by a significant decline in the World Bank governance ranking, the small size of the economy, which is highly susceptible to external shocks, and substantial but decreasing budget deficits leading to an increase in public debt.
Malta has demonstrated one of the strongest growth performances among Fitch-rated sovereigns. The economy has grown by 86% since 2015, compared to 14% in the eurozone. The strong economic growth has led to a surge in employment, with the number of employees increasing to about 320,000 in 2024 from 180,000 in 2015. The unemployment rate in Malta is also low at 3.1%, which is favorable compared to the peer median of 6.3%.
The IMF and European Commission estimate potential growth around 5%, well above regional peers, and is supported by dynamic population growth. Fitch forecasts GDP growth to be 4.3% in 2025 and 2026, following 6% growth in 2024. The slowdown is due to a declining contribution from labor as immigration regulations are tightened.
Malta’s World Bank governance indicators have significantly deteriorated since 2013, from the 86th percentile to the 71st. Government effectiveness and control of corruption rankings have particularly declined, more than 20pp over the same period.
Fitch estimates the budget deficit fell below 4% of GDP in 2024 from 4.6% in 2023. The agency forecasts a continued deficit reduction to 3.5% in 2025 and 3% in 2026. The strong economic growth allows the government to reduce the budget deficit without implementing outright fiscal consolidation measures.
The European Commission opened excessive deficit procedures (EDP) against Malta based on the 2023 fiscal deficit. However, due to the strong growth momentum, the government is on track to bring the deficit back to 3% over the next two years, faster than the standard four-year adjustment horizon envisaged in the European framework.
Gross general government debt is forecast to stabilize at around 50% of GDP in 2024-2026, below the ’A’ current median of 57% and well below the 60% EU threshold. Financing risks are low, with ample liquidity in the domestic banking sector and a strong domestic investor base.
The Maltese banking sector continues to be characterized by ample liquidity, sound capitalization, and manageable exposure to non-performing loans (NPLs). The NPL ratio of 2.1% was broadly in line with the EU average of 1.9%.
Malta has an ESG Relevance Score (RS) of ’5[+]’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in Fitch’s proprietary Sovereign Rating Model. Malta has a high WBGI ranking at 71.4, reflecting its long track record of stable and peaceful political transitions, strong institutional capacity, effective rule of law, and a relatively low level of corruption.
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