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A+ for Malta from German ratings agency

Stable outlook for the country

Creditreform Rating has affirmed the unsolicited long-term sovereign rating of “A+” for Malta and gave the country a stable outlook.

It also affirmed Malta’s unsolicited ratings for foreign and local currency senior unsecured long-term debt of “A+”.

The agency said that its ratings were driven by:

• Very strong economic expansion boosting per-capita income and employment; favourable macroeconomic performance set to continue in 2018/19 but small size, high degree of openness and high exposure to cyclical industries continue to weigh on the economy’s shock-absorbing capacities.

• Although sovereign continues to be characterised by a generally high quality of its institutional set-up, room to improve judicial system and step up anti-corruption measures; European institutions have raised concerns regarding effective implementation of AML/CFT rules.

• Fiscal risks stemming from composition of state revenues set against prudent budget execution, underpinned by a steadily improving headline balance and the government’s commitment to run surpluses; debt-to-GDP ratio set to remain on a steep downward trajectory.

• Risks associated with elevated current account volatility and high external liabilities are mitigated by limited external funding needs of the private sector and a positive net international investment position.

The agency noted that Malta’s first pillar ‘institutions’ of the World Economic Forum’s Global Competitiveness Index underscored some deterioration in the institutional framework, as Malta fell from rank 29 to 33 in 2017-18, while slipping from rank 50 to 56 and 15 to 22 as regards judicial independence and strength of auditing and reporting standards respectively.

It also noted that the business environment continued to be impeded by cumbersome administrative procedures. Businesses were confronted with a comparatively heavy administrative burden, as Malta remains at rank 84 out of 190 economies, with the most pressing challenges being the procedures for starting businesses (rank 103), insolvency resolution (rank 121), and property registration (rank 151).

Moreover, infrastructure bottlenecks continued to be an obstacle to doing business, as highlighted by the World Economic Forum’s most recent global competitiveness report.

Malta’s performance on the sub-index ‘infrastructure’ fell significantly short of most European peers. Being placed at rank 52, only Romania (55) and Bulgaria (58) scored lower on that count, it said.

The report in full can be read here.

In a statement, Finance Minister Edward Scicluna welcomed the rating which he said reflected Malta’s very strong economic expansion, which over the past five years  outpaced growth levels seen in the EU by a wide margin, boosting per-capita income and employment.

Creditreform, he said, also viewed “Malta’s healthy and improving public finances as a key credit strength”. 

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