Fitch has confirmed Malta’s ‘A+’ long-term rating, with the credit rating agency also maintaining its stable outlook for the country. The US-based agency believes it will take until the second half of next year for Malta’s GDP to return to pre-pandemic levels.

FATF greylisting has “not yet materially impacted the Maltese economy,” Fitch noted, though that could change if the country were to remain on the list for a prolonged period of time. 

Fitch expects the country to rebound to growth and stabilise its level of debt well before it hits the 2011 high of 70 per cent of GDP, but also warned that an extension of the COVID-19 pandemic would hurt the tourism-focused economy.

Fitch upgraded its projections for 2021 GDP growth to 5.7%, up from 4.7% in its previous report. However, it noted that growth lagged at just 0.5% in the second quarter of this year, as private and public consumption as well as net exports decreased slightly, more than offsetting a strong increase in investment. Growth is then expected to ramp up to 6.1% in 2022, as it matches pent-up demand and the tourism sector continues its recovery.

Fitch noted that Malta’s high vaccination rate had allowed authorities to ease measures and restrictions.

It upgraded its forecasts for Malta’s public finances, on the back of what it said was “better than anticipated revenue performance”. While it previously said that it expected the deficit to hit 11.5% this year, it is now forecasting an 8.4% deficit. On the other hand, Fitch expects the 2022 deficit to be larger than it previously anticipated (6.1% versus 5.4%).

The credit rating agency expects the government will partly make use of a 1.4%-of-GDP let-out authorised in the budget “to deal with the pressure from higher energy prices”. Debt levels remain manageable, it indicated. Public debt is projected to peak in 2023 at 61% of GDP – marginally higher than the 59% ‘A’-rated median, but well below the 2011 peak of 70%. This, Fitch said, illustrated “Malta’s fiscal prudence in pre-pandemic years of strong growth”.

The FATF decision to greylist Malta has not yet materially impacted the Maltese economy and its large banking sector

Fitch noted that the FATF decision to greylist Malta has “not yet materially impacted the Maltese economy and its large banking sector”. But this could change, it warned, if the country remained on the list for a long period of time, as it would damage the country’s reputation and lead to capital outflows.

Further risks are related to the OECD deal on a global minimum corporate tax rate, and any EU move to shut down Malta’s golden passport scheme.