Toronto-based Credit Rating agency DBRS has rated Malta A, the government said today.

“According to the American experts (the agency is actually based in Canada) DBRS this reflects highly on Malta’s strong economic growth as well as the good progress to reduce deficit and debt. In fact, the international analysts say that if this progress continues and the public sector reforms are successful, the country’s rating can improve even further.”

The government said DBRS praised Malta’s labour sector and the government incentives to industry, especially those related to foreign direct investment. At the same time they stressed on the need for improvements to the education system and employee training. The agency also noted that the majority of Maltese companies are small and do not have access to investment funds.

DBRS has expressed different views to those of the Opposition, which claims that the previous administration left a sound economy. It said that Malta’s competitiveness was undermined from 2007. It mentioned the infrastructure shortcomings, limited access to credit, a lack of innovation and corporate debt. Contrary to the Opposition’s claims, DBRS said “Malta has exhibited weak fiscal management in the past but a number of improvements are underway”.  

The agency spoke positively about the restructuring of public entities like Enemalta and said this exercise reduced the country’s financial risks. It also praised the government’s efforts to reduce the national debt in a sustainable way over the coming years. It also praised efforts in the labour market, such as the pension reform, free childcare, the reduction in income tax, the in-work benefit and the tapering of benefits.

DBRS forecasts that the economy will grow by 3.3% this year and debt will fall to 68% of GDP. It also noted that government stocks were immediately taken up by small-scale investors when usually these make up for a third of the amount. This is a clear indication of faith and optimism.

PN statement

In reaction, PN Deputy Leader Mario de Marco, who is also Shadow Minister for Finance said the Opposition welcomes DBRS's long-term foreign and local currency issuer ratings of A to Malta.

"In assigning this rating, DBRS noted that “Membership in the Eurozone plays an integral role in Malta’s economy, ensuring reliable access to European markets. Eurozone membership also fosters strong macroeconomic policies and makes available financial support from European institutions”. It is ironic that the Labour Party, which opposed both European Union membership and the adoption of the Euro, is now seeking to take credit for the positive effects of Malta's accession to the European Union and the Eurozone. DBRS also praises Malta's financial stability during the financial crisis which crippled other countries, a clear reference to the sound financial management of PN led-administrations.

In awarding this rating, DBRS also points to certain weaknesses that could pose a threat to Malta's future ratings. It is important that Government addresses these weaknesses. The increase in government's recurrent expenditure, driven by an unbridled public sector recruitment, is putting strain on Malta's debt which between 2013 and 2015 is set to increase by €700 million.

Government should also concentrate on ensuring that Malta's productivity improves. Our industrial production has been in decline since October 2013. This has started to impact negatively on the average wage of people who work in the manufacturing sector, as evidenced by the findings of the latest Labour survey.

Whilst a number of sectors of the economy continue to perform well, others, such as manufacturing and retail, are lagging behind. The Opposition reiterates its call for government to ensure that all sectors of our economy move forward to the benefit of all and not pockets of our society.