Moody’s confirms Malta’s A3 rating is now ‘Stable’
On 4th October 2014, Moody’s Investors Service affirmed Malta’s A3 government bond rating and changed the outlook from negative to stable. The report confirms the government fiscal and economic policy is taking Malta in the right direction and budget measures introduced last year resulted in Malta ranking among the UE’s top-performers on economic growth, employment, and unemployment. Malta has received similar assessments from other international entities such as the European Commission, the International Monetary Fund, and other credit rating agencies such as Standard & Poor’s and Fitch. All good news for Malta.
“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,” said Finance Minister Edward Scicluna.
“This also confirms that budget measures introduced last year resulted in Malta ranking among the UE’s top-performers on economic growth, employment, and unemployment. We shall be looking towards the coming budget to build further on these results.”
In its assessment, Moody’s is expecting a sustained and healthy economic outlook with economic growth rising to 2.7 per cent in 2014, and by a further to 2.8 per cent in 2015. Growth for 2015 is expected to be mainly driven by final consumption and capital formation, the later boosted by the investment in the energy sector.
Moody’s also notes that the deficit-to-GDP ratio is forecasted to fall to 1.7 per cent, while the debt-to-GDP ratio is expected to fall below the 70 per cent in 2015, to 69.7 per cent. Moody’s also expects the primary surplus as a percentage of GDP to increase to 1.1 per cent in 2015.
Moody’s is also foreseeing a positive outlook for the tourism industry, with the industry benefitting from Malta’s central position and good connectivity. Furthermore, Moody’s positively notes that Malta has a good track record of relatively low and stable inflation, remaining broadly in line with the inflation rate of the euro area. On the external side, Moody’s expects the current account to remain in surplus in 2014 and 2015 at 1.0 and 0.8 per cent respectively, driven by continued growth in services exports.
The Minister also welcomes Moody’s positive endorsement of Malta 2015 draft budget plan recently submitted to the European Commission. In this regard, Moody’s remarks that “the Government’s draft budgetary plan for 2015 should put fiscal consolidation on a good footing” and that “budget targets appear to be realistic, as they are built on reasonable macroeconomic assumptions and measures that appear socially acceptable for key stakeholders.”
Read the full article here: Source: Malta Independent
The rating agency’s report is an update to the markets and does not constitute a rating action.
“Malta’s economy will continue to grow in 2015 as healthy household balance sheets and government reforms in the energy sector and in the labour market will support domestic demand” says Lucie Villa, a Moody’s Assistant Vice President and Analyst.
Moody’s also expects that Malta’s economy will continue to be shielded from potential external shocks given its wealth and its high level of competiveness that makes it relatively adaptable to changes in global trade and growth patterns.
Malta’s popularity as a tourist destination is set to increase due to improved airline connectivity, the restructuring of the sector to meet new customer demand, and reduced attractiveness of competing tourism destinations in the Mediterranean, says Moody’s. Malta’s tourism also benefits from the island’s central location in the Mediterranean sea and its English-speaking population. Tourists arrivals increased by 8.9% during the first half of 2014 compared to the same period in 2013, supporting the rating agency’s view that the industry will keep growing in the medium term.
In addition, the government’s 2015 draft budgetary plan shows progress in fiscal consolidation. Moody’s expects Malta’s fiscal deficit to decline to 1.7% of GDP in 2015, and the debt will begin falling after having peaked at 70% of GDP in 2013-14. However, the rating agency notes that the country continues to have high debt relative to similarly rated peers (representing 70% of GDP). The government’s financial strength is also burdened by contingent liability risks stemming from the island’s loss-making energy firm, Enemalta, which carries government-guaranteed debt equivalent to around 10% of GDP.
Moody’s notes the policy initiatives targeting the energy sector and labour market, which are both hindered by inefficiencies, are aimed at improving the country’s productivity and capital formation, although it is too early to determine whether they have reached the government’s objectives. Read more at: https://www.moodys.com/research/Moodys-Maltas-robust-growth-outlook-and-reliable-access-to-domestic–PR_311341
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