Ratings agency Standard and Poor's has affirmed its 'A-/A-2 credit rating for Malta with a stable outlook.
S&P said the stable outlook reflected the balance that - over the next 24 months - it expected growth outcomes to moderate from currently high levels. It also expected the fiscal deficit to gradually decrease, broadly in line with the government's consolidation commitments.
However, it warned it could lower the ratings if Malta's external sector competitiveness were to diminish, leading to an unwinding in the current account surplus.
A reversal of authorities' efforts to enhance and implement governance and anti-money-laundering frameworks could also trigger a negative rating action.
On Saturday morning, Prime Minister Robert Abela said Malta has received another vote of confidence in a week of increasing global uncertainty.
"Lauding our decision to keep energy prices stable, they conclude that our rapidly growing economy shows no sign of being affected by weaker external conditions."
Growth driven by tourism demand, private consumption
In its ratings report, S&P noted among others that real GDP growth is estimated to be 6.2% this year and average 4% over the period between 2025 and 2027.
This is despite still-weak economic conditions among key trading partners, in particular in the eurozone.
It said Malta's growth was being driven by strong tourism demand and robust private consumption, particularly given strong inward migratory flows.
It also estimates that the government's gross debt stock will end 2024 at 48% of GDP - a level S&P expects to broadly plateau thanks to the consolidation efforts and favourable economic growth prospects.
Real GDP expanded by 6.9% in first three Qs
Malta's real GDP expanded by 6.9% in the first three quarters of the year compared with the same period in 2023.
S&P noted that private consumption and tourism exports have been central to this recent momentum.
Inbound tourists for the first 10 months were up 19% over the same period in 2023, while total tourist expenditure was up 22%.
Tourism demand has remained robust despitechallenging economic conditions in most, if not all, source markets, and potentially also reflects the worsening geopolitical situation in the Middle East leading European travellers to holiday more within Europe
Migration boosting economy, but might not be sustainable
S&P meanwhile refers to "strong migratory flows" which it says are boosting economic activity.
However, it warns that the flows are unlikely to be sustainable.
Malta's population is 25% larger than what it was in 2015 - which, owing to having the EU's lowest birth rate and subsequent shrinking native population - reflects the liberal migration policies of recent governments, according to S&P.
"Migrants have come from a blend of EU countries (mostly high-skilled workers) and non-EU countries (mostly low-skilled workers), and together have contributed to the country's very strong economic growth in recent years.
"Nevertheless, given that Malta is already the most densely populated country in the EU and the worsening infrastructure bottlenecks in the archipelago, we expect the government to continue tightening migration policy, particularly from non-EU countries, over which it has more policy levers".
It is unclear for S&P, however, the extent to which migratory flows to Malta will decline because of tighter migration policy, and more so its impact on economic activity.
Debt stock manageable
Malta's debt stock is manageable and has broadly favourable characteristics, according to S&P.
"We estimate net government debt to GDP will end 2024 at 39%, rising modestly to 42% by 2027," it said, adding that interest costs on new issuances spiked last year but have moderated this year, in line with European Central Bank monetary easing.
"We project interest costs will occupy an average of 4.1% of government revenue over 2024-2027, which is low on a global comparison."