Moodys has affirmed Malta’s A2 credit rating with a stable outlook, with the agency highlighting the country’s “wealth and fast-growing economy” but also warning that an ageing population and the environment could pose challenges.
In a credit opinion issued on Tuesday, the US-based agency noted that the country has strong debt affordability metrics, a diversified economy for its size and elevated wealth levels that allow it to absorb shocks.
However, it also noted that Malta’s small size and open economy make it vulnerable to external developments, that government debt is rising and that Malta continues to face challenges related to anti-money laundering controls, the rule of law and corruption.
Moodys ranked Malta’s economic strengths at baa1, in line with Estonia. The country ranked higher, at a3, on institutions and governance strength on the back of its EU and Eurozone membership, similar to Poland.
It scored an a1 on Moody’s metric for fiscal strength, putting it on par with Slovenia and a baa for susceptibility to event risk. Analysts said banking sector risk is pushed up due to the sector’s large size to the economy but also tempered by the fact that international and domestic bank orientations are firewalled from one another.
Moody’s expressed some concern about climate change risks and Malta’s environment more generally.
“Highly limited forest areas and a low share of protected natural areas also lead to a low rank for natural capital, whereas the country also faces more elevated waste & pollution risks in part due to rapid growth in the resident population over recent years,” the analysts said in their report.
Low fertility rates add to demographic challenges, though it noted that the government has so far mitigated those labour market pressures through strong importation of workers.
Moody's said it expects Malta’s economy to grow by 3.8% this year, 3.5% in 2024 and 3.7% in 2025.
The tourism, finance and gaming sectors are all performing well and the Maltese banking sector remains strong, it said.
The agency said it expects Malta’s public deficit to reach 4.5% in 2024 and 4.1% in 2025 but also warned that debt interest payments will creep up in the coming years as higher interest rates filter through.
By 2026, the agency expects Malta to have around 58% of its GDP in debt.