Scope Ratings reviews its ratings either yearly, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remains proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, 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 the Republic of Malta (A+/Stable; S-1+/Stable) on 12 October 2021. 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

The Republic of Malta’s long-term A+/Stable ratings are underpinned by the following credit strengths: i) the country’s robust growth potential; ii) a record of effective fiscal consolidation with a steadily declining debt-to-GDP ratio entering the Covid-19 crisis, supported by strong growth, fiscal surpluses and a declining interest payment burden; and iii) a strong external position with consistent current account surpluses, a net international creditor position, further bolstered by euro area membership. These factors underpin Scope’s view that the country is well positioned to weather the Covid-19 crisis and will return to a positive trend of strong growth from 2021 onward. Challenges relate to: i) its externally dependent, resource constrained economy, which pose long-term stability and sustainability risks; ii) fiscal risks related to an ageing population and government guarantees; and iii) lingering albeit improving institutional and administrative deficiencies related to governance and oversight in the financial sector which constrain improvements in the country’s reputation as an emerging financial centre and could pose financial stability risks. Scope does not foresee substantial near-term rating pressures stemming from Malta’s greylisting by the Financial Action Task Force unless Malta fails to implement the action plan in a timely manner and incurs material reputational damage as a result.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The rating/Outlook could be upgraded if, individually or collectively: i) continued implementation of structural reforms raises the country’s growth potential and supports greater diversification into higher-value added activities; ii) fiscal discipline is maintained, returning the public debt-to-GDP ratio to a firm downward trajectory; and/or iii) reforms to strengthen institutional frameworks are completed and lead to material improvements in risk perceptions.

Conversely, the rating/Outlook could be downgraded if, individually or collectively: i) there is a structural deterioration in the growth outlook; ii) the fiscal outlook weakens substantially and/or ii) authorities fail to effectively address lingering institutional deficiencies, leading to reputational costs for Malta’s position as an emerging financial centre.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Ratings, 8 October 2021) 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: Thibault Vasse, Senior analyst.

© 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.