DBRS confirms Malta’s “A” rating with stable trend

Malta’s high economic growth rates and the money saved during the boom years have enabled the country to weather pandemic shocks and maintain its credit rating, German rating agency DBRS said.

DBRS said that although COVID-19 budget support has taken a significant chunk of Malta’s coffers, generating a large deficit and a higher level of public debt, a strong economic recovery supported by a high vaccination rate should see the country recover a healthier fiscal situation.

The rating agency made the assessment in a rating report which confirmed Malta’s long-term rating at “A” with a stable trend.

Malta’s listing on the FATF gray list has so far had “no significant or discernible impact on the real economy,” DBRS said, echoing an assessment made by another rating agency Fitch on last month.

The final impact of the gray list, he said, would depend on how long Malta remains on the gray list – something the President of Bank of Valletta has also previously indicated.

Public finances

DBRS said preliminary estimates indicated that the Maltese economy grew 7.6% year-on-year in the first nine months of 2021, with the Central Bank’s forecast of 5.1% annual growth potentially being cautious.

He noted that Malta entered the pandemic following several years of ‘remarkable’ economic growth, which led to budget surpluses between 2016 and 2019 and Malta closed the GDP gap with the EU average .

The government’s response to the pandemic, DBRS said, was “critical to mitigate its impact,” with a surplus of 0.5% of GDP falling to a deficit of 9.7% the following year.

He cited figures from the European Commission, which estimated that the temporary economic measures had an impact on GDP of 6.3% in 2020, with a projected impact of 3.9% for 2021 and 0.1%. in 2022.

Measures to shield the private sector from high energy prices could worsen Malta’s deficit (which is expected to reach 11.1% this year), but DBRS said it believed stronger than expected growth in tax revenue could compensate for this.

The government expects the deficit to fall to 3% by 2024. The potential risks for the one reported by DBRS would be if Air Malta needed financial assistance and possible calls for loans from the Bank of development of Malta.

Recovery in the event of a pandemic

DBRS analysts said they saw a strong rebound in private investment and consumption this year, with high household savings and retired investment plans.

The government expects public debt to peak in 2023 at 62.7% of GDP, then decline. DBRS noted that debt projections for the coming years have improved due to the strong economic performance so far, and said the country is still able to raise capital at favorable rates, with a return. 10-year bond averaging 0.5% between January and October 2021.

If growth prospects deteriorate or the government finds itself forced to step in and support the SOE financial system, those debt projections would weaken, he said. The costs linked to the aging of the Maltese population will also weigh on public funds.


The recovery projections will largely depend on a good recovery in tourism, DBRS warned, the sector being an important source of income, jobs and investment.

Tourism remains sluggish, with arrivals between January and September representing only 27.5% of tourist arrivals during the same period in 2019.

While tourist arrivals are expected to record a stronger recovery in 2022 and 2023, an element of uncertainty persists as the pandemic continues.

AML and governance

While DBRS said it had seen no evidence of a significant impact of graylisting on Malta’s real economy, it noted that the country’s performance on the ‘corruption control’ indicators of Malta. the World Bank is weak.

Malta’s performance on this indicator as well as on the rule of law indicator “has deteriorated in recent years”, he noted.

He noted that several reforms have since been introduced and that the EU has “congratulated Malta” on these changes, although there is also scope to further strengthen judicial independence and ensure effective criminal prosecutions.


DBRS noted several potential risks that could derail Malta’s economic recovery and lead to a downgrade.

Labor shortages could slow the recovery in the near term, as travel restrictions limit the migration of third-country nationals, a key source of job growth.

The pandemic could continue to shake the global economy, limiting tourist arrivals and requiring additional government intervention.

Malta’s attractiveness for foreign investment could suffer if measures to address financial integrity risks and institutional governance weaknesses identified by international bodies persist.

Addressing the efficiency issues of the AML would be key to limiting the potential damage to the reputation of the Maltese banking system, DBRS said.

In the medium to long term, Maltese citizenship income through an investment program and corporate tax could come under pressure. An OECD initiative to harmonize corporate tax rates could erode the country’s tax base and pose a threat.

Malta’s cash-for-passport program faces a challenge from the EU, he noted, and it was therefore positive that the government showed “prudent management” of windfall revenues from this program.

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