Ratings agency expects Malta finances to improve, economy to decelerate

Warning about possible infrastructure bottlenecks and labour shortages

Ratings agency DBRS says it expects Malta's financial situation to continue to improve, even if economic growth will decelerate.

DBRS on Saturday confirmed Malta's long-term rating at A (high) and medium-term rating at R-1 (middle), with a stable outlook.

“DBRS expects Malta to remain one of the euro area’s top growth performers in the next couple of years. Although Malta’s medium-term prospects remain solid, DBRS expects economic activity to decelerate gradually as infrastructure bottlenecks and labour shortages become more evident. Major risks to the outlook stem from an escalation of protectionist trade measures hurting global trade and growth as well as the impact on tourism from Brexit," the agency said. 

"DBRS is of the view that Malta’s public finances will continue to improve in coming years. Given the difficulty in predicting the proceeds from Malta’s Individual Investors Programme or IIP, DBRS considers appropriate the authorities’ intention to comply with the government’s Medium-Term Objective, net of the IIP. DBRS expects the debt ratio to continue declining related to the primary surplus and the favourable debt snowball effect."

It said its Stable outlook for Malta reflects its opinion that further upgrades are unlikely in the absence of a sustained material reduction in the public debt ratio to low levels driven by sound fiscal management and economic performance or a significant increase in Malta’s income per capita levels, fully converging to the European Union average.

"While DBRS’s baseline factors in a relatively positive economic and fiscal outlook, a deterioration in the trajectory for public debt in the medium term could exert downward pressure on Malta’s ratings. This could derive from a deterioration in growth prospects; a relaxation of fiscal discipline, or the materialisation of contingent liabilities,” the agency said. 

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