Ratings agency Standard and Poor’s has revised its outlook on Malta to positive from stable while maintaining the BBB+/A-2 rating.

The agency said it expected the economy to grow by close to three per cent annually between 2015 and 2018, outpacing the eurozone as a whole.

Economic growth was attributed to investments in the energy sector, including the interconnector and the building of a liquefied natural gas terminal and power station.

S&P said economic diversification after 2016 into information and communication technology and medical tourism, could boost investment.

Growth was also expected to be fuelled by domestic demand on the back of “stronger private consumption” as a result of utility tariff cuts.

“Consumption trends are being supported by rising real wages and, more importantly, broader female participation in the labour market,” the agency said.

S&P noted that while the low corporate tax rate was an attraction to foreign investment in the banking, insurance, and gaming sectors, the economy would be “sensitive” to potential pressure for a eurozone-wide standardisation of corporate tax regimes. The agency forecast that debt was to decrease to 55 per cent of GDP by 2018 but it commented on fiscal risks posed by debt guarantees issued to State entities like Enemalta and Air Malta. These debt guarantees totalled 16 per cent of GDP at the end of 2014.

But S&P warned that without further reforms in the pension and healthcare systems, public finances would become strained in the medium term.

The agency also warned that nominal unit labour costs have been increasing at one of the fastest rates in the euro area, posing risks for competitiveness.

An increase in non-performing loans held by core domestic banks – 9.1 per cent of total loans in March – was “a challenge” for the economy. Almost half of these loans are in the construction and commercial real estate sectors, S&P noted.

Finance Minister Edward Scicluna welcomed the report, adding it recognised government’s efforts to reform certain sectors and diversify the economy.

“Standard & Poor’s’ decision to upgrade the outlook to positive re-affirms the solid performance of our economy and prospects for the upcoming years,” Prof. Scicluna said.