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.