Supporting its opinion, DBRS mentions a “strong economic momentum”, boosted by year-on-year accelerating 7.5% GDP in Q3 2018, which the Central Bank of Malta’s (CBM) forecasts to reach 5.9% in 2018. Although expecting a gradually decelerating GDP for the upcoming years, DBRS still foresees it to remain high, especially compared to European peers.

“Benefiting from tax-rich economic growth, fuelled by domestic demand, strong job creation, and the impulse from its International Investment Programme (IIP), the CBM estimates Malta’s fiscal surplus stood at 2.1% of GDP in 2018. Against this backdrop, the Maltese government’s debt-to-GDP ratio could drop to 45.0% in 2018, according to the CBM,” the DBRS press statement says. DBRS expects the debt ratio to continue to decline related to the primary surplus and the favourable debt snowball effect.

Despite an upward pressure from improving economic and public finance metrics, DBRS says Malta’s structural challenges continue to constrain the ratings. These challenges, according to DBRS, include the size and openness of the economy, external developments, including international corporate taxation or regulatory change, all of which, could negatively affect economic and fiscal variables.

“Malta’s A (high) rating is supported by its eurozone membership, strong external position, low reliance on external financing, favourable public debt structure, and households’ strong financial position. However, Malta’s contingent liabilities, stemming from its large state-owned enterprises and concentrated financial sector, and rising age-related costs are potential sources of vulnerability for public finances. Malta’s small and open economy exposes the country to external developments,” the press statement adds.

The full rating statement can be seen on the official website of DBRS.

“The year 2019 started well with the issue of three positive credit ratings which all have confirmed Malta’s good standing in terms of its economy and public finances when compared to its peers,” Minister for Finance Edward Scicluna says about the credit rating opinion.

Founded in 1976 in Canada, DBRS is an independent, privately held, globally recognised credit ratings agency with offices in Toronto, New York, Chicago, London, Frankfurt and Madrid.

Earlier, Fitch Ratings affirmed Malta’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at “A+” with a Stable Outlook, according to a press statement Fitch recently published.

The post DBRS confirms Malta’s long-term rating at ‘high’ first appeared on The Malta Business Weekly.

The positive outlook reflects Malta’s sustained progress in reducing the national debt as well as its robust medium-term growth prospects that are supportive of further improvements in public finances, the DOI press statement says when summarising the report. According to Moody’s, should the improvement in public funds be sustained, an upcoming credit rating upgrade is possible.

Growth is expected to remain strong in 2019, chiefly fuelled by the foreseen increase in investment and private consumption. Moody’s also forecasts a surplus of 1.2% of GDP, as well as sees the Maltese government targeting a surplus net of revenues from the Individual Investor Programme (IIP) in 2019.

The Moody’s report also acknowledges the International Monetary Fund’s (IMF) fiscal transparency evaluation report concluding that Malta meets the standard for excellent or advanced practice for 21 out of the 35 principles of the IMF’s Fiscal Transparency Code. At the same time, Moody’s also acknowledges anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations by Malta.

The full summary by the DOI on the Moody’s credit rating report is available at the official website of the government department.

“I am pleased to note that Moody’s is acknowledging our efforts to strengthen the regulatory institutions while sustaining macroeconomic and fiscal stability,” Minister for Finance Edward Scicluna says.

The post Moody’s affirms Malta’s rating at A3 with a positive outlook first appeared on The Malta Business Weekly.

Supporting its opinion, Fitch mentions the country’s “ratings balance high income per capita, strong governance and human development indicators relative to peers, robust economic growth, eurozone membership and large net external creditor position, against its large banking sector, relatively high government contingent liabilities and vulnerability to shocks due to its small and very open economy.”

Budget performance, which Fitch sees to be on an improving trend, has been stronger than “A-rated” peers. Fitch adds that general government balance turned a surplus in 2016, peaking in 2017 at 3.5% of GDP. “The sharp increase in 2017 fiscal surplus was partly due to significant individual investor programme (IIP) revenues and tax revenues from strong economic activity,” the press statement adds.

Fitch estimates the surplus to have narrowed to 1.1% of GDP in 2018 and that it will narrow further to 0.8% of GDP by 2020. Fitch believes Malta’s fiscal policy outlook is anchored by the government’s commitment to a structural budgetary balance net of IIP revenues, with IIP revenues ringfenced for investment purposes, the press statement outlines.

Fitch assumes that in case of need, the Maltese government would only be predisposed towards supporting the core domestic banks that are systemically important, in particular, Bank of Valletta (balance sheet assets of 96.8% of GDP at June 2018). For HSBC Bank Malta (55.7% of GDP), Fitch believes that any necessary support would come from its foreign parent company. In Fitch’s view, the Maltese government would be very unlikely to support the international banks and would probably not support non-core banks either, the press statement says.

The full report by Fitch is available at their official website.

“The ‘A+’ rating by Fitch following Moody’s ‘A3’ grade earlier this week, continue to strengthen our view that the Government’s strategic vision for our country is being accomplished,” Minister for Finance Edward Scicluna says.

Fitch Group is a global leader in financial information services with operations in more than 30 countries. With dual headquarters in London and New York, Fitch Group is owned by Hearst.

The post Fitch Ratings affirms Malta at ‘A+’, Outlook Stable first appeared on The Malta Business Weekly.