Moody's Investors Service today affirmed Malta's A3 long-term issuer, senior secured and senior unsecured debt ratings. The outlook remains stable.

The key factors underpinning today's affirmation are:

(1) Malta's resilient economy, supported by high competitiveness and recent structural reforms which increase potential growth from a narrow economic base

(2) Malta's relatively high, although decreasing, debt levels compared to peers coupled with sizeable contingent liabilities

(3) The resilience of the Maltese banking system despite its large size, with domestic banks following a conservative and traditional banking model

Moody's said the stable outlook reflected its view that fiscal consolidation would continue to support a gentle downward trajectory in the debt burden, although it expected the debt burden would remain above similarly rated peers for some years, and sizeable contingent liabilities from state-owned enterprises would continue to act as a constraint on the rating.

Malta's tourism industry was particularly exposed to any fall in British tourists resulting from the UK's decision to leave the EU and the subsequent depreciation in sterling, although there were mitigants in place to limit the impact on economic growth.

In a related rating action, Moody's also affirmed the senior unsecured rating of Freeport Terminal (Malta) Limited at A3 with a stable outlook, in line with the sovereign's ratings. The senior debt instruments issued by Freeport Terminal (Malta) Limited were backed by unconditional and irrevocable guarantees from the Maltese government.

Malta's local-currency bond and deposit ceilings and long-term foreign-currency bond and deposit ceilings were unchanged at Aaa. The short-term foreign currency bond and deposit ceilings were also unaffected by this rating action and remain Prime-1.

The first key factor supporting Moody’s affirmation was Malta's resilient economy, which Moody's classified as 'Medium+' in terms of its economic strength. While small and with a relatively narrow base, the economy was competitive and exhibited relatively elevated wealth levels, it said.