The government has expressed disappointment that ratings agency Moody's has reclassified Malta's foreign and local-currency government bond ratings from A1 to A2, because of the global and euro area outlook.
In a statement, the Ministry of Finance said it was disappointed that Moody's felt the reclassification was considered necessary because of the deteriorating global economic outlook and the continued instability in the euro area, notwithstanding the government's efforts to successfully address the economic crisis and Malta's continued efforts towards sustainable finances.
The ministry said that in the context of the European sovereign debt crisis, the Maltese government understood Moody's decision to reclassify Malta's foreign and local-currency government bond ratings while maintaining Malta's 'A' credit rating.
As clearly stated in Moody's reports, Malta's country ceilings for bonds and bank deposits were unaffected by the rating action and remained at Aaa, in line with the euro area's ceilings.
"It is also to be noted that Moody's acknowledge the limited impact on the Maltese Economy of the 2008-2009 crisis and that this impact was only limited because of the government's efforts to assist manufacturing companies that faced severe declines in external demand, to promote the tourism product, and invest in the development of new routes."
The ministry explained that the government's decision to postpone the deficit reduction targets to finance the impetus package in the 2009 Budget saved more than 5,000 jobs and ensured that Malta's manufacturing sector capacity was increased rather than slashed.
"However, the government acknowledges the fact that this decision, as Moody's put it, meant that the expected improvement in the government balance sheet, post entry to the EMU, did not materialise."
The ministry observed that Malta has managed to continue to sustain above EU average growth rates and significantly lower levels of unemployment because of the various structural reforms that continue to be implemented and the incentives are given to small business and industry.
The government is committed to take all necessary actions to strengthen and ensure the country's economic and financial stability- Finance Ministry
"Therefore, it would be highly imprudent to steer Government's economic and financial management policy away from its current emphasis on continued macroeconomic stability and economic growth."
"The Maltese economy is growing at a healthy rate. Investment, including foreign direct investment, has increased. Merchandise exports have increased substantially. Likewise, the services sectors – tourism, financial services and others – are contributing substantially to the country's current economic and employment growth. The number of gainfully occupied persons is increasing. Unemployment is on the decline. Our public finances are also being consolidated as planned; indeed the latest Eurostat financial data show that Malta's debt at 68% is well below the euro area average of 85.1%," the ministry said.
It insisted that the government will continue to take the required decisions to ensure the country's continued macroeconomic stability. It will take measures to consolidate the country's public finances and ensure their long-term sustainability; safeguard and improve Malta's international competitiveness; promote Malta as an attractive base for local and foreign direct investment and support any viable enterprise that could face temporary difficulties.
"While taking note of Moody's concerns, the government is committed to take all necessary actions to strengthen and ensure the country's economic and financial stability," the ministry said.
Moody's Malta report: http://www.timesofmalta.com/articles/view/20110906/local/moody-s-downgrades-malta-to-a2-negative-outlook.383598