Malta’s Strong Economic Outlook: What Investors Need to Know from Fitch’s Latest Rating

On September 13, 2024, Fitch Ratings affirmed Malta's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A+' with a stable outlook. This rating shows that Malta has strong economic strengths, including high income per person and solid growth rates, thanks to its membership in the EU and euro area. 

In addition to Fitch Ratings, Scope Ratings also confirmed Malta's long-term foreign-currency rating at 'A+' with a stable outlook in August 2024. Scope pointed out that Malta’s economy is strong, thanks to high-value exports like online services and support from the EU, helping to boost the country’s growth. 

However, both rating agencies agree that careful financial planning is important for Malta to stay strong and stable.

This article explores the main reasons why Malta received strong ratings from Fitch in this latest outlook. We go over Malta's economic strength, public finances, and job market. We also discuss the challenges the country faces, such as outside risks, fiscal concerns, and possible changes in laws and taxes. 

By understanding these points, investors and businesses can get a clearer picture of Malta's economy and its future stability.

Key Rating Drivers

Fitch Ratings has pointed out several important factors that support Malta's 'A+' rating and stable outlook.

• Economic performance: Malta has a high income per person and strong economic growth, with an expected average growth of 5.7% this year. This is much higher than the eurozone forecast of around 0.8% and the 'A' rated countries' forecast of 2.0%. Key sectors contributing to this growth include services, finance, and tourism, with tourist arrivals exceeding pre-pandemic levels. Recent updates to Malta’s national accounts also show a 6.3% increase in GDP for 2023, which positively impacts Malta’s economic rating.
• Public finances: Despite this growth, Malta faces challenges with its public finances. Fitch predicts this year’s budget deficit will be 4.0% of GDP, but the government plans to reduce it to 3.0% by 2026. The government aims to keep its debt below 60% of GDP, but there are concerns over the cost of energy subsidies tied to international prices, which could impact future public finances. The European Commission has raised issues over Malta’s 4.6% deficit in 2023, making fiscal management a priority for the country.
• Labour market: The job market in Malta is strong, with low unemployment rates expected at 3.2%. There is good job growth, but there are concerns about skill shortages and productivity, which could impact future growth. 
  Challenges and Risks
  
  The report outlined several challenges and risks that could affect its economic stability.
• External vulnerabilities: Because Malta has a small economy, it is sensitive to outside events. This means that global economic changes can have a big impact on its growth and financial health.
• Fiscal uncertainties: There are concerns about the country’s budget, especially regarding energy subsidies. The government does not have a clear plan for managing these costs, which depend on fluctuating international energy prices. This creates risks for public finances.
•  Regulatory and tax changes: Changes in laws and taxes can also influence how much money the government gets from businesses. With uncertainties surrounding the EU’s Minimum Tax Directive, which could affect corporate tax income, Malta's financial situation may face additional difficulties.
  
  Overall, these factors highlight the need for careful planning to keep Malta's economy strong and stable.

The Bottom Line

In summary, Malta’s ‘A+’ rating with a stable outlook shows that the country has a strong economy, despite some challenges like outside risks, fiscal issues, and tax changes. Malta’s high income per person, strong economic growth, and low unemployment make it a good place for investment. However, smart financial planning is important to handle these risks and keep the economy stable.

Our multilingual professionals at DZ Advisory are glad to assist you in understanding how these economic factors may affect you when moving to or conducting business from Malta. If you would like to receive more information, please provide us with your contact details and one of our team members shall be in contact with you promptly.

 is currently preparing a completely new programme that aims to attract third-country nationals who are start-up investors wishing to permanently reside here, subject to achieving the required and legal criteria to successfully establish a fruitful business for Malta. This new permit should entice entrepreneurs to invest and register their start-ups in Malta, bringing along their new and innovative ideas which will help shape the future of the Maltese industries and economy.

The Agency is currently preparing a completely new programme that aims to attract third-country nationals who are start-up investors wishing to permanently reside here, subject to achieving the required and legal criteria to successfully establish a fruitful business for Malta. This new permit should entice entrepreneurs to invest and register their start-ups in Malta, bringing along their new and innovative ideas which will help shape the future of the Maltese industries and econo