Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Malta (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A+/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 20 January 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The Republic of Malta’s long-term A+/Stable ratings are underpinned by the following credit strengths: i) the robust economic momentum and strong growth potential; ii) a record of fiscal prudence and moderate government debt, balancing sizeable but declining fiscal deficits; and iii) a strong external position enhancing resilience to external shocks, further bolstered by euro area membership.

Malta is expected to benefit from still robust real GDP growth projected at 4.1% in 2025, down from 5.0% in 2024 and 7.5% in 2023, significantly outpacing EU average growth. Domestic economic activity is expected to be driven by buoyant domestic consumption, benefiting from the widening of tax income bands and a strong labour market, EU-funded investment, and solid performance of services exports. Scope expects strong GDP growth to persist with an average rate of 3.8% over 2026-2029, in line with Malta’s estimated growth potential.

Furthermore, Malta’s credit ratings are supported by a narrowing fiscal deficit. The general government deficit is expected to steadily decline to 3.5% of GDP in 2025, down from 4.0% in 2024, supported by robust tax receipts linked to strong economic performance and enhanced tax compliance. The decline in the deficit is also supported by a reduction of energy subsidies, in line with lower global energy prices, and lower capital transfers, following last year’s equity injection in KM Malta Airlines. In the longer term, the projected reduction of the fiscal deficit is underpinned by the EU’s Excessive Deficit Procedure, with Malta’s medium-term fiscal structural plan 2025-2028 limiting net public expenditure growth, which is consistent with an annual structural adjustment of 0.5 percentage points until the deficit is corrected. The projected reduction of the fiscal deficit is also supported by Malta’s strong track record of prudent fiscal management, and the government’s plan to invest in renewable energy sources. This should support budgetary consolidation despite pressure on current spending, including on pension and social benefits, as well as capital expenditure pressures related to the climate and digital transitions which benefit funding support through European institutions.

The robust economic momentum and lower budget deficits drive Scope’s projection of general government debt remaining below 50% of GDP by 2029. Malta benefits from moderate public debt, resulting in a moderate interest burden which is projected to average 1.4% of GDP between 2025 and 2029, as well as moderate public sector borrowing requirements that are covered through domestic capital markets.

Credit rating challenges relate to: i) an externally dependent and resource-constrained economy, which presents risks to the stability and sustainability of the growth model; ii) fiscal risks in the form of age-related cost pressures and elevated government guarantees issued to state-owned enterprises; and iii) lingering, albeit improving, institutional challenges related to the financial oversight and supervision frameworks, as well as governance metrics.

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

The ratings/outlooks could be upgraded if, individually or collectively: i) structural reforms are implemented to improve the resilience of the country’s growth model, resulting in greater economic diversification into higher-value added and sustainable economic activities; and/or ii) continued fiscal consolidation returns public debt-to-GDP to a firm downward trajectory.

The ratings/outlooks could be downgraded if, individually or collectively: i) there is a structural deterioration in the growth outlook; ii) the fiscal outlook weakens significantly; and/or iii) institutional fragilities re-emerge and threaten Malta’s economic attractiveness and competitiveness.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Thomas Gillet, Director

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