We reproduce in today’s issue (The Malta Business Weekly) the full text of the Standard & Poor’s rating action that was published last week.

Unfortunately, the text was not distributed locally by the government nor by any one of the local media (and it is not that readily available from the S&P website). So all the public got was self-praising press releases instead of the real meat: the actual text.

This is very unfortunate as it shows that once again the authorities seem too eager to say their thing instead of letting the public to judge on their own.

Anyway, the full text can be found on page 4 and readers can analyse it at leisure.

There are parts which do not properly concern our attention here, but we would like to focus on the first part, the rationale that led S&P to affirm Malta’s ratings at BBB+/A-2 with a Stable outlook.

The analysis praises the government action over the past months in reforming the energy sector.

It says: “Malta's government has made progress on energy sector reform, a key part of the ruling party's election promises. If progress can be maintained, it will support already-improving economic growth, which appears to have exceeded our previous expectations for 2013.

“Energy-sector reform ultimately aims to reduce the high costs of electricity production. We understand that the government's potential sale of a stake in national electricity provider Enemalta, an important step in its multiyear restructuring, is now nearing completion. Although the company continues to record losses, new production facilities should help to reduce government subsidies.

“Government also guarantees a proportion of Enemalta's debt, the majority of a guaranteed debt stock of 17% of GDP. The completion of a liquefied natural gas plant (by 2015) and an electricity interconnector with Sicily should help to reduce the cost of electricity production by up to 50%.

“If this benefit is passed through to consumers, government subsidies could be further reduced; Malta's electricity prices are currently among the highest in the EU.”

But then the analysis introduces a note of caution: “We still forecast growth to remain lower than before the onset of the 2008 financial crisis, and fiscal space remains strained by general government gross debt (73% of GDP in 2013).

“Under the European Commission's "excessive deficit procedure", which Malta again entered in June 2013, it is required to reduce its debt burden to 60% of GDP, which will likely require additional efforts.”

It points out: “We view this progress (in addressing the energy issues) as a positive signal that the government will tackle other longstanding structural issues, such as pension reform, the low female labour force participation rate (47%) and supply gaps in more highly skilled positions.

“Economic growth is crucial for Malta to address these issues. We continue to expect that growth will remain below pre-crisis levels, with real GDP per capita growth averaging 1.8% from 2013 to 2016, versus 3% between 2005 and 2007.

“We expect import-heavy domestic demand to reduce the contribution of net exports to growth, but that consumption growth will be cautious over the next few years. However, a delay to the recovery in domestic demand meant that net exports continued to contribute positively in 2013, alongside employment growth in services, which we estimate at above 2% in 2013.”

It then says: “Tax receipts were above budget through November 2013, helping overall revenues to increase by 8.4% over the same period.

“Tempered by expenditure growth of 6%, we expect the government to record a deficit slightly higher than its 2.7% of GDP fiscal target for 2013. We continue to expect that the government's deficit will remain marginally behind its targets in 2014-2016.

“We forecast the increase in gross debt to be higher than in 2012, at 4.3% of GDP, but that the debt burden will stabilize over 2014 at 73% of GDP in gross terms.”

In other words and to conclude, the S&P document praises government action on energy but urges it to further action on longstanding structural issues such as pension reform, low female labour force participation, and supply gaps in more highly-skilled positions.