German credit rating agency Creditreform has confirmed Malta’s A+ rating and while revising the country’s outlook from positive to stable. 

The agency said that it expected Malta’s economy to slump by 5.5 per cent this year but recover to 4.8 per cent growth in 2021. 

“Policy efforts devoted to COVID-19 should mitigate the worst effects on the corporate and household sector,” the agency said, adding that sectors like gaming should continue to perform well while tourism would suffer. 

Nevertheless, it said that the economic shocks of the “worst recession seen in decades” meant that uncertainty for the medium-term outlook remained unusually high. 

The agency said Malta’s government had acted quickly to introduce a “significant” packet of measures to safeguard public health and also introduced a “substantial policy package” of financial aid. 

While uncertainty meant risks are “heavily skewed to the downside”, the agency also noted some positive factors at play. 

“Malta’s favourable initial fiscal position, together with the fiscal prudence demonstrated in the recent past and the assumption of a shortlived shock, all support the stable outlook on Malta's credit rating,” it said. 

Creditreform expects Malta to report an 8 per cent fiscal deficit this year, with public debt rising to 55 per cent of GDP (from 43 per cent last year). They expect the debt-to-GDP ratio to stabilise at that level before resuming its downward trajectory, which was interrupted by the COVID-19 crisis. 

The German agency's report comes following similar assessments by Moody's, Fitch and Standard and Poor's, as well as the International Monetary Fund's World Economic Outlook. 

Those assessments predicted anything from a 5.9 per cent GDP contraction this year to a more moderate 2.8 per cent shrinkage.

Creditreform saw a number of positives in Malta’s pre-coronavirus economy when making its rating decision: 

• Strong GDP growth 
• One of EU’s lowest levels of public debt 
• An “extraordinarily strong” services surplus 
• Consistently low unemployment 
• Continued surges in public consumption 

The agency also saw some potential threats that could derail Malta’s efforts: 

• Vulnerability to external shocks 
• Structural bottlenecks 
• Shortages of skilled labour 
• Problems in ease of doing business, especially for property registration 
• Reputational damage due to anti-money laundering shortcomings

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