Despite ongoing political turmoil threatening Malta’s good governance standing, high economic growth is likely to continue and the country’s outlook remains positive, ratings agency Fitch said on Friday. 

The agency reaffirmed Malta’s long-term A+ rating with a positive outlook, noting strong economic fundamentals with little evidence of an overheating economy. 

Malta has been rocked by a series of corruption allegations in recent months, leading to protests and the forced resignation of prime minister Joseph Muscat. 

In its assessment, the ratings agency said that Malta outperformed the A-rated median when it came to World Bank human development and governance indicators, though its score on ‘voice and accountability' and ‘control of corruption’ subcomponents has slipped in recent years. 

The agency assessment noted that: 

• Strong GDP growth continues to be propelled by strong public consumption with a recovery in public investment; 

• Revisions of population growth have led to lower GDP-per-capita projections, but Malta is expected to continue converging with the EU average;

• Malta ran a small deficit in the first half of 2019 as public works boosted capital investment, but is expected to have ended the year with a 1.1% GDP surplus; 

• Debt dynamics remain positive and Malta’s government debt is expected to fall to 37.3% by the end of 2021;

• Government guarantees are relatively large, at 8.3 per cent of GDP, but “on a clear downward trend”;

• There is little sign of the economy overheating;

• Unemployment rates are likely to stabilise at around 3.4% in 2020-21;

• Malta’s large banking sector will continue to make it a large net creditor, at an estimated 132% of GDP by the end of last year;

• Banks appear healthy, with good returns on equities and declining shares of non-performing loans;

• Banks’ loans to non-residents, at 17.5%, are high but appear to have stabilised;

What could help or hurt Malta’s rating?

Fitch highlighted five things which could change its assessment of the country, for better or worse. 

1. Continued decline in the government’s debt-to-GDP ratio.

2. Confidence that Malta can sustain high GDP growth and bring GDP-per-capita up to that in more highly-rated countries.

3. Further progress in addressing banking and business environment weaknesses.
 
4. A shock to the banking system requiring fiscal support or the crystallisation of material contingent liabilities.

5. Serious external shock that affects growth or debt dynamics.