Rating agency DBRS on Friday confirmed Malta’s long-term rating at A (high) with a stable outlook, saying the country’s economic fundamentals were solid and its institutions “relatively sound”. 

Malta's short-term foreign and local currency rating was confirmed at R-1 (middle). 

The Canadian agency listed a series of encouraging indicators which it said were factors in deciding the country’s rating. They included: 

• ‘Remarkable’ GDP growth 
• A highly-elastic labour supply 
• A public surplus, even if income from citizenship sales was factored out
• Continued decline in the country’s debt-to-GDP ratio
• More investment on infrastructure
• Sound local core banks 

It nevertheless also saw some potential risks and pitfalls: 

• An open economy that is more vulnerable to protectionist trade measures 
• Infrastructure bottlenecks and labour shortages 
• The ever-growing burden of pension and healthcare costs, as society ages
• Increasingly stretched valuation in the housing market
• Shortcomings in the implementation and enforcement of anti-money laundering laws
• Tax base erosion if there were to be international changes to taxation policies

In its assessment, DBRS said that Malta’s rating could improve if it continued to reduce its debt-to-GDP ratio further, if it successfully reformed laws to enhance local governance and if it showed further signs that the country was increasingly resilient to external shocks. 

On the other hand, the agency said that Malta’s rating could face downgrade pressures if GDP growth dropped significantly, if fiscal and debt indicators took a sustained turn for the worse or if contingent liabilities materialised. 

In a reaction, the government said that it welcomed the positive rating and would be working hard to speed up reforms to improve Malta's economic and social standing. 

DBRS is one of four credit rating agencies, alongside Moody's, Fitch and Standard and Poor's, to be fully recognised by the European Central Bank. 

Read the full rating report.