Ratings agency Fitch has given Malta's economy a clean bill of health as it confirmed its A+ rating. 

Malta's ratings reflect its high national income per head compared with the 'A' median, robust economic growth, a large net external creditor position, and strong governance indicators, the agency said in a review. 

Unemployment is low compared with 'A' rated peers, declining to an estimated 4% in 2017 from 4.7% in 2016, and household net worth is high, it said.

But Fitch said Malta's ratings are constrained by the small and highly open nature of its economy, which makes it vulnerable to external developments, and its high, albeit declining level of contingent liabilities and outsized banking sector relative to GDP.

Real GDP grew at a robust pace in the third quarter of 2017 at 7.2% and growth is estimated to reach 7% for the whole year, boosted by a strong net trade contribution. Economic growth will be slightly slower at 5.9% in 2018, but faster than the 'A' median five year average of 3%.

Declining unemployment, good absorption of EU funds

Domestic demand will remain strong, with declining unemployment and increase in wages pushing up private consumption. Increased absorption of EU funds and launching of large projects in health and education sectors will bring back equipment and machinery investment to positive growth, it said.

The structural shift of the economy towards more service-oriented and less investment-intensive sectors will lead to a sustained surplus on the current account forecast at an average 9.7% of GDP in 2018-2019.

Fitch forecasts general government balance to remain in surplus in 2018 at 1.5% of GDP, compared with the 'A' median fiscal deficit of 1.8% of GDP.

The Maltese banking sector remains sound with robust capitalisation and liquidity ratios, although highly concentrated.

Real estate prices are still rising at a fast pace due to a strong inflow of foreign workers, booming tourism sector, exemption of stamp duty for first-time buyers and supply constraints. However, prices appear to still be in line with fundamentals according to the Central Bank of Malta and Fitch believes mitigating factors to potential instability stemming from the housing sector are relatively strong. 

In a reaction, the government said that Fitch had confirmed that the improvement in public finances is down to structural changes. 

"The positive report from Fitch shows that not only did the country obtain a higher rating than previous years, but is also obtaining better economic and financial results than countries which have the same rating. This should lead to more interest in Malta from foreign investors."