Malta's stability has been given an important endorsement this month following credit rating agency's Fitch to confirm Malta's 'A' rating and stable outlook. The report also confirms the stability of the financial jurisdiction, commenting that despite its size, the banking sector is strong and has proved resilient to the eurozone crisis. Fitch remarks that "the core domestic banks have a loan/deposit ratio of only around 66% and have not been drawing on any significant amount of ECB liquidity facilities. Banks are well-capitalised and the government has not needed to provide capital or liquidity."
Malta also has a robust net external creditor position relative to rating peers and positive international investment position. The banking sector is the main contributor, but the sovereign also enjoys modest net external creditor status, adds Fitch.
Looking at the wider economy, the agency notes that GDP growth is outperforming the eurozone average. In 2013 the economy grew by 2.9%, better than 2012 (1.1%) and higher than the eurozone average (negative 0.4%). Fitch expects above potential growth averaging 2.5% in 2015-16, continuing above the eurozone average. At 5.7% in July the unemployment rate is below both the 'A' median and the Eurozone average, while the employment rate has risen, underpinned by the increasing female labour market participation rate. The decline in unemployment therefore took place against the backdrop of a strong increase in the labour force.
With regard to general Government gross debt, Fitch forecasts that it will decline gradually in the medium term to 70 per cent of GDP by 2020. Fitch also notes how despite the pressure on public finances posed by the healthcare, social security and transport sectors, the credit rating agency does not expect these developments to compromise deficit reduction in 2014.
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