As expected, the first weeks of 2016 greeted us with a differing mixture of news: some positive, others less so. From a financial and economic perspective, the latest Standard & Poor’s rating of Malta was definitely a positive development.  In its assessment of Malta, the credit agency maintained Malta’s ratings at BBB+ with a positive outlook. Standard & Poor’s also reaffirmed its view that Malta's economy will continue to grow strongly, outpacing that of the euro zone over the next three years.

In this day and age, this type of economic and financial news is music to economists and policy makers in Malta. On the other hand for the majority of people, the fact that Standard & Poor’s keep its positive outlook and even made explicit reference to a possible upgrade in the coming months does not entails too much. However, its significance cannot be downgraded.

The reason is rather straightforward. The views of the credit agencies matter. They matter to potential investors and those whose decisions can make or break an economy. One needs only to keep in mind that among the major obstacles being faced across the EU is the severe lack of investment and economic growth. The views of the credit agencies play a fundamental role here. A positive assessment will encourage investment. A negative assessment will have the opposite impact.

In contrast with what is happening in the euro zone, Malta is experiencing constant increases in investment. What is even more encouraging is that most of the increase in investment is being driven by the private sector and this fact is imperative. The reason being that while public investment can lift private investment and boost growth it can also be counterproductive especially in times of tight budgetary constraints.

Investment is not being attracted to Malta by sheer coincidence. It is the result of hard work and courageous decisions. Certain decisions might appear as controversial, however, this Government was elected to take decisions and decisions are being taken. These are helping to further diversify our economy, particularly into information and communication technology, education, and medical tourism. Standard and Poor’s are also positive about the reforms being undertaken in the energy sector. Apart from attracting foreign direct investment, this Government has put stability of prices top of its agenda. This avoided the volatility and uncertainty that was the order of the day under the previous administration. Fluctuating prices increase uncertainty and this has adverse effects on investment and businesses.  The policy of hedging of energy prices is akin to taking insurance –providing protection against a possible eventuality of hike in prices - it smoothen expenditure and aid planning.  Returning to the previous policy will have disastrous consequences on our stable economy.

The surge in private investment is not only underpinning growth in Malta but is boosting the productive capacity of our economy and putting less pressure on our budget.  Standard and Poor’s, similar to other credit agencies, takes particular interest in budgetary performance and diligently assess that our public finances are sustainable. In this regard, Standard & Poor’s had words of praise as it positively noted the decline in both the deficit and the debt during the last two years and expects these to continue declining in the coming years.

This last point was somehow overlooked by local observers. In a way, this Government’s success in managing public finances rendered people less attentive to fiscal development. A typical case of taken for granted what a few years ago was deemed unattainable.  Surely this Government is not being complacent. It is appropriate to remember that the Government is increasing its efforts in putting our public finance back on solid ground by targeting a further declined of the deficit to 1.1 percent of GDP in 2016, alongside a targeted decline in the debt-to-GDP to 65.2 percent. This should lead Malta towards attaining its Medium Term Objective of a balanced budget, in structural terms, by 2019.

Something that is often misunderstood is the importance of having an appropriate pace in terms of fiscal consolidation. This is well understood by the credit agencies – not only Standard and Poor’s – and acknowledge that the correction of fiscal imbalances needs to be gradual. This is important in order to avoid adverse shocks which could undermine economic growth. It is of little use being overambitious in cutting our deficit and then having to face an economy which is no longer growing. It is also being understood that confidence ought to be nurtured continuously and once lost can taken long years to re-establish.

The confidence shown in our economy by this credit rating agency is further encouraged by our achievements in managing our public finances. Sometimes good news triggers further good news. This argues well and should reassure us that the path undertaken will lead Malta to enjoy further success.

Silvio Schembri is a government MP