Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereign, sub-sovereign and supranational issuers. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Malta (A+/Stable; S-1+/Stable) on 28 July 2020. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Malta’s A+/Stable rating is underpinned by the country’s euro area membership, strong economic growth potential, moderate public debt level and favourable external position. The government has implemented a large countercyclical fiscal package to mitigate adverse economic effects from the Covid-19 shock, including higher public investment, which underpins recovery prospects after the expected recession in 2020 while also raising public debt levels closer to the Maastricht threshold. Scope expects a timely reversal of the fiscal deficit on the basis of prudent fiscal policies and the country’s strong growth potential from 2021 onward. At the same time, the ECB’s asset purchase programmes and monetary stimulus ensure low financing costs for the treasury. Malta’s rating is constrained by unfavourable demographics, which need to be addressed via health and pension reforms to ensure the long-term sustainability of public finances. Improving, but still institutionally constrained regulatory oversight of the financial sector, raises Malta’s vulnerabilities to i) sudden reversals of foreign financial capital, and ii) regulatory changes, particularly at the European level.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Public Finance and Sovereign Ratings, 21 April 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Bernhard Bartels, Director

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