Credit rating agency Standard and Poor's has revised Malta's economic outlook from 'stable' to 'positive' in a move which will strengthen Malta's position as an ideal investment location in a number of economic sectors. The agency noted that euro membership, a higher participation in the job market and an efficient tax regime is attracting significant foreign investment into Malta's banking, insurance, and gaming industries.
As a result, it expects that Malta will run a small current account surplus over our 2015-2018 forecast horizon, and remain in a narrow net external asset position of about 16% of current account receipts (CARs) on average during 2015-2018.
It noted that international banks play a key role in Malta's international investment position, reporting that foreign banks use Malta as a booking centre for their own financing needs.
Standard and Poor's also investigated Malta's exposure to the Greek crisis, concluding that it does "not believe events in Greece will have a material bearing on Malta's credit profile. Like all eurozone members, Malta is exposed through common monetary, fiscal, and development institutions such as the European Central Bank, the European Financial Stability Facility, and the European Investment Bank. Apart from contingent liabilities associated with those institutions, Malta's exposure to Greece is limited. Malta's trade with Greece is small and direct financial links are few. The agency further assessed that "the external debt of Malta's domestic banks as sufficiently contained such that Malta would cope with a permanent real increase in external funding costs spilling over to eurozone markets from Greece."
On a wider economic perspective, the agency notes that Malta's economic growth prospects remain strong relative to its EU and 'BBB' rating category peers. Malta's budgetary consolidation is expected to continue, leading net general government debt to decline to 55% of GDP in 2018, from 59% in 2014. Malta's real GDP grew by 3.5% in 2014. This is projected to expand by close to 3% annually on average during 2015-2018.
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