Global rating agency Fitch has reaffirmed Malta’s A+ credit rating with a stable outlook, highlighting the country’s strong economic performance. But the agency also pointed out potential fiscal risks on the horizon.

In a report published on Saturday, Fitch said that Malta’s economy continued to show strong momentum, with GDP growth projected to be 5.7 percent this year, compared to 0.8 percent for the Eurozone and 2 percent for other A-rated countries.

The growth has been driven primarily by the thriving services and financial sectors, alongside a strong recovery in tourism.

Despite the positive outlook, Fitch warned of structural challenges, particularly in the labor market.

Unemployment is expected to remain low at 3.2 percent, well below the eurozone average of 6.5 percent. However, skill shortages and low productivity levels posed risks to Malta’s future growth potential.

The report also addressed Malta’s fiscal position, projecting that the fiscal deficit will gradually decrease to 4 percent of GD
P in 2024 and further to 3 percent by 2026. Malta is currently under EU excessive deficit procedures due to rule changes this year.

However, the rating agency flagged uncertainties regarding the government’s fixed-price energy policy, which lacks a clear exit strategy.

The country’s debt ratio stood at 47.3 percent of GDP at the end of 2023 and Fitch expects it to rise to 49.6 percent by the end of 2024.

Looking to the future, Fitch indicated that Malta’s credit rating could be upgraded if the government managed to achieve sustained fiscal consolidation and a reduction in debt.

Conversely, the country risks a downgrade if the government’s debt continues to rise, economic growth slows, or changes in regulatory and tax policies make Malta less appealing to foreign investors, the agency said.

Prime Minister Robert Abela welcomed the reaffirmation of Malta’s A+ rating.

Writing on social media platform X, he said: “Another A+ rating for Malta by Fitch on the basis of our ‘strong economic momentum’ with growt
h projected at seven times the Euro area average. This will enable us to lower taxes and maintain energy subsidies while still reducing the deficit.”

Source:The Namibia News Agency