DBRS Morningstar has confirmed Malta’s A (high) rating, maintaining a stable outlook due to Malta's economic resilience, supported by robust tourism and service exports.
Economic growth reached 6% year-on-year in early 2024, driven by domestic demand, substantial foreign labour inflows, and government support, the credit rating agency said. Although growth is expected to moderate to 3.5% in 2025, it is expected to remain strong relative to EU peers. Furthermore, DBRS said it expects GDP growth to be higher than originally forecast, as projections were made before a recent revision of national accounts data by the National Statistics Office.
Key contributors to Malta’s economic performance include a solid Euro area membership, strong external positioning, and a well-capitalized banking sector.
However, DBRS has expressed concerns about the size of Malta’s deficit, which hit 4.6% of GDP in 2023—surpassing the Euro area average of 3.6%—and the lack of a “clear exit strategy” to end energy subsidies.
The government, it said, expects global energy prices to drop, meaning those subsidies will cost the country less. That means that if energy prices rise more than expected, public finances will suffer, DBRS said.
Prime Minister Robert Abela said Malta's fast economic growth was "defying experts' expectations once again" and said the DBRS report indicated confidence that Malta's deficit and debt "will decrease on the back of our stable policy environment".
DBRS noted that the government intends to reduce the deficit to 3.0% by 2027, with phased reductions in support measures, particularly following the closure of Air Malta. It also noted that tax revenues are on the rise due to stronger collection reforms, with VAT and income taxes up over 20% year-on-year.
Despite fiscal pressures, public debt remains moderate at 47.3% of GDP, lower than most EU countries, providing flexibility in case of economic stress. However, debt is projected to rise, reaching 49.9% by 2026 due to increased capital injections into KM Air Malta and energy support costs. Financing risks are limited, with most public debt held by residents, though the government may need to adjust fiscal policies should energy prices stay high.
In the banking sector, Malta continues to demonstrate strong stability, thanks to high capital buffers and liquidity. DBRS highlighted that while asset quality has improved, with a decline in non-performing loans to 2.4%, the sector faces concentration risks due to the significant exposure to the housing market. Real estate loans represent 66% of total domestic loans, and although a systemic risk buffer is in place, DBRS warned of potential vulnerabilities.
From a governance and anti-corruption perspective, DBRS said Malta has made significant improvements in recent years to reform its institutional framework but that there remains “room for further convergence towards other sovereigns”. It said continued dedication to such reform is essential to maintaining Malta's standing, especially given its role as a financial hub with significant international banking activities.
Malta’s economic outlook remains cautiously optimistic, with a favourable balance of trade driven by service exports and a current account surplus of 1.1% of GDP in 2024. However, Malta’s small, service-driven economy remains susceptible to external shocks, including geopolitical tensions. Infrastructure constraints and relatively low labour productivity also limit growth potential.
DBRS said that Malta could improve its credit rating with prudent debt management and enhancing its resilience to external risks, while a downgrade could result from increased debt or a reversal in governance reforms.
In governance, Malta has shown improvements but continues to trail in EU rankings, particularly in corruption control. The government is expected to sustain reform efforts, with Prime Minister Robert Abela likely prioritizing institutional improvements to align Malta more closely with higher EU standards.