Malta’s sovereign creditworthiness continues to receive a strong vote of confidence from international agencies, with DBRS Morningstar recently reaffirming the nation’s A (high) Long-Term Issuer Rating with a Stable Trend. So while, the decision announced on 10 October, underscored Malta’s strong economic performance, it simultaneously cast a critical eye on persistent fiscal and governance headwinds that temper an otherwise bullish outlook.
The high rating issued by DBRS, places Malta firmly in the “good quality” echelon of economies, underpinned by its Euro area membership, which provides institutional stability and access to essential financial backstops. The agency praised Malta’s comparatively strong economic momentum, driven primarily by its vibrant services sector and robust domestic demand. While growth is moderating, it is projected to remain solid, a trajectory largely mirrored by other institutions.
The central point of contention across nearly all institutional assessments remains Malta’s fiscal consolidation path. DBRS noted that while the government deficit-to-GDP ratio is narrowing, it is doing so slowly, kept high by strategic, non-austerity measures. Specifically, the continued energy subsidies and recent income tax adjustments, have slowed the pace of deficit reduction.
The above observation is congruent to the similar points raised by the Malta Fiscal Advisory Council (MFAC) in their Half-Yearly Report 2025 assessment. The MFAC was very clear that government must exercise strict control over expenditure growth in the second half of 2025. This is crucial for Malta to ensure compliance with the EU’s new expenditure rules, which mandate that the growth in nationally-financed net primary expenditure must be kept close to zero this year.
Similarly, the European Commission, in its Spring Economic Forecast for 2025, also forecast a gradual deficit decline in Malta’s deficit-to-GDP ratio while simultaneously forecasting Malta as one of the EU’s fastest-growing economies. The Commission, like DBRS, had mentioned that while strong economic activity is generating the fiscal revenue needed to manage the debt, there is however still need for fiscal discipline, that is, reigning government expenditure. Hence this is a recurring theme.
The narrative of strong growth buttressed by a dominant services sector, yet constrained by structural issues, is echoed across all major rating agencies and reporting institutions. The IMF Report issued earlier this year, while forecasting a robust 3.9% growth for Malta in 2025, placing it among the highest in the Euro area, was unequivocal in highlighting two key risks: the substantial exposure of the financial system to the real estate market and the expectation that energy subsidies will continue to consume a sizable portion of the fiscal deficit.
In June, S&P Global Ratings affirmed Malta’s rating at A- with a Stable Outlook. While S&P expected the deficit-to- GDP ratio to gradually decrease in 2025, it assumed it would not fall below the 3% limit until 2027, a more cautious timeline than the European Commission’s forecast of 2026. This slow path was directly attributable to the cost of the subsidised energy price fix, together with rising public expenditure.
Moody’s last credit rating report issued towards the end of 2024, also had a similar message. It noted that Malta’s economy is rapidly growing, wealthy, and relatively diversified, but cautioned on the need for fiscal consolidation, making it clear that future ratings will depend on the government’s success in achieving its deficit reduction targets as economic growth continues.
DBRS, IMF and S&P drew attention to similar other structural risks.
DBRS, while praising Malta’s progress on reforms and its exit from the FATF Grey List, maintained that governance indicators, particularly those related to control of corruption and judicial efficiency, still lag the EU average, constituting an important structural challenge to the overall rating profile. S&P explicitly stated that Malta “scores weakly in corruption perception and rule of law assessments compared with most EU peers”, while acknowledging progress on anti-money-laundering frameworks. The IMF report published in early 2025 maintained that governance reforms must continue decisively to maintain long-term confidence and sustainable growth. The report acknowledged significant progress in strengthening the Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) framework. On the other hand, the IMF called for further efforts to advance judicial reforms, including strengthening the Chief Justice appointment process and improving the efficiency of the justice system to reduce the length of proceedings and solidify the business environment. Moody’s has also flagged ongoing concerns related to control of corruption, rule of law, and the supervision of money laundering-related risks. Addressing these institutional weaknesses is noted as a key factor for any potential future rating upgrade.
All reports issued by credit rating agencies or reporting institutions affirm Malta’s strong economic performance. However, they all contain the same consistent warnings indicating that the high ratings going forward will depend heavily on the government’s ability to successfully execute its commitment to fiscal consolidation and press ahead with deep-seated governance related reforms.
In conclusion, the convergence of reports from DBRS, S&P, Moody’s, the IMF, and the European Commission reveals that Malta’s current high credit ratings and economic resilience are fundamentally conditional. The nation is at a crucial juncture where its strong economic momentum is increasingly at odds with its structural weaknesses. Continued high public expenditure and governance deficits (particularly concerning corruption and judicial efficiency) represent a self-imposed vulnerability, actively slowing fiscal consolidation and exposing the economy to unnecessary risk. Therefore, Malta’s long-term economic resilience – the very confidence underpinning its present high rating – will not be determined by its economic growth figures alone, but by the swift and decisive political commitment to rein in spending and close the institutional gap with its EU peers.
