In its annual Article IV Consultation, the International Monetary Fund described in positive terms the Maltese banking sector, defining it as 'resilient'. The Fund noted that banks are well capitalized, profitable, and liquid. Solvency and liquidity of core domestic banks and other peer banks remain above the minimum regulatory requirements, and their profitability is above the euro area average.
Positively, the Fund describes the increase in the coverage ratio and the national authorities' consideration of using further Pillar II measures to reduce non-performing loans as welcome and appropriate, as are further increases in coverage ratios as already envisaged. The completion of the ongoing work on insolvency legislation, aiming to reduce court proceedings time and enhance contract enforcement, should help improve NPL resolution, adds the assessment.
On broader economic terms, the IMF notes that Malta's economy is growing strongly. Real GDP growth has been one of the highest in the euro area since the beginning of the crisis, supported by vibrant domestic demand, large infrastructure projects, and a stable banking sector. Unemployment is at historical lows and labour participation is increasing. The current account remains in surplus and the external position is broadly in line with fundamentals.
The IMF provides a 'strong' outlook for Malta, with growth expected to remain solid in 2016–17, driven initially by domestic demand and later by a gradual recovery of external demand.
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