Updated - Adds PN reaction - Moody’s ratings agency has reiterated Malta’s A3 credit rating with a positive outlook.
It said in its annual report on Malta that the rating was supported by a ‘healthy outlook’ on Malta’s economy and the government’s access to a large and reliable domestic funding pool, which was supported by a high deposit base.
The agency said it was forecasting real growth of around 2.8% for the Maltese economy in 2015.
The agency welcomed initiatives to tackle problems in the energy sector and by increasing female and youth participation in the labour market, saying these steps were in line with recommendations by international institutions such as the IMF and the EU, although it was too early to conclude that they had reached the intended objectives.
Moody’s said the government’s main challenge remained that of scaling the national debt which, at 70 per cent of GDP was high. Furthermore, the country’s reliance on domestic funding made the government vulnerable to the health of the banking system beyond typical contingent liability risk.
The agency said it expected the government deficit to fall to 1.7 per cent next year, based on the 2015 draft budget.
FINANCE MINISTER WELCOMES REPORT
Finance Minister Edward Scicluna welcomed the Moody's report.
"The Moody's report confirms the government fiscal and economic policy is taking Malta in the right direction. The overall sentiment in the country is one of optimism. Our policies are trickling down and being felt at every level of society. This is confirmed by Moody's highlighting of higher domestic consumption, which confirms we are making a positive difference in people’s lives," he said.
"This also confirms that budget measures introduced last year resulted in Malta ranking among the EU’s top-performers on economic growth, employment, and unemployment. We shall be looking towards the coming budget to build further on these results."
"Moody’s positive reconfirmation of Malta’s A3 rating with a stable outlook joins similar assessments by other international entities such as the European Commission, the International Monetary Fund, and other credit rating agencies such as Standard & Poor’s and Fitch, and which together confirm that Malta is on a strong economic and fiscal footing, and is well-positioned to again meet its economic and fiscal targets for the coming year," the minister said.
PN REACTION - WARNING SIGNALS MUST NOT BE IGNORED
Opposition finance spokesman Tonio Fenech welcomed Moody’s affirmation of the A3 credit rating for Malta but said warning signals should not be ignored by the government.
He noted that the ratings agency had given a ‘stable’ rating for Malta on the basis of its economic performance during and after the international financial crisis and its growth since, particularly in tourism and financial services.
The Moody’s statement, Mr Fenech said, continued to reveal deception by the prime minister about the power station. While the prime minister had said the delay in the building of the new power station would be of a few months, Moody’s said the project was in initial stages.
Moody’s had also indicated doubts as to how successful the government's reforms in the energy sector would be, particularly with regard to the sustainability of lower tariffs.
In several parts of its report Moody’s had also noted the strong increase in public debt by the Muscat government, an increase of €3 million every day.
The governemnt should not ignore these warnings, which also included the sharp reduction in exports and imports and the drop in retail trade, Mr Fenech said.