Fitch Ratings has affirmed Malta's Long-Term Issuer Default Ratings (IDRs)at 'A+' with a Stable Outlook. A full list of rating actions is at the end of this rating action commentary.
Malta's rating is supported by robust economic growth, high per capita income, and EU and euro area membership. These strengths are balanced against significant deterioration in governance indicators over the past decade and the small size of its economy, which implies high vulnerability to sectoral shocks.
Relatively High Growth: Our real GDP growth forecast is slightly below 4% in 2026 and 2027, following 4% growth in 2025. The mild slowdown is due to a declining contribution from labor as immigration regulations are tightened. Malta has one of the strongest growth perrmances among Fitch-rated sovereigns. The economy has grown by a cumulative 90% since 2015, compared with 16% in the eurozone. Annual average GDP growth over this period was 6.5%, well above the 'A' three-year current median of 3.8%. Per capita GDP, measured in purchasing power terms was 110% of the EU average in 2025, 11pp higher than in 2015.
Employment Surge: Malta has achieved one of the highest employment rates in the EU, as the number of employees grew to 330,000 in 1Q26 from 198,000 in 2015. Around 10,000 came from abroad, boosting net immigration and approximately 30,000 were due to increased participation of the Maltese population. Malta's 3.1% unemployment rate in 2025 also compares favorably with the peer median of 6.3%. The information and communication technology, tourism and financial sectors provide the key momentum for employment and economic growth.
Lower Budget Deficit: We forecast the budget deficit will remain around 2% of GDP over the forecast horizon. The budget deficit fell to 2.2% of GDP in 2025, which allowed exit from the excessive deficit procedure, the corrective arm of the EU fiscal framework. The gradual fiscal improvement, from 3.4% of GDP deficit in 2024 and 4.4% in 2023, was primarily driven by the revenue side, benefiting from the strong economic and employment growth.
High Energy Subsidy: The cost of energy support measures could reach EUR230 million in 2026 (almost 1% of projected GDP) and remain around EUR200 million in 2027, based on Fitch's global oil price assumption. Malta operates an energy subsidy scheme, based on a broad domestic consensus, which essentially keeps electricity and fuel prices fixed for the domestic private sector, insulating from global energy price movements. The scheme mitigates the current inflation shock, but it discourages energy savings and comes with a sizeable fiscal cost.
Stable Debt Trajectory: We forecast gross general government debt will stabilize at around 46% of GDP in 2026-2028, well below the 'A' current median of 57% and the 60% EU threshold. Over the medium term, a small primary budget deficit and mild slowdown in nominal growth should result in a broadly stable debt ratio. Favorable financing conditions for the sovereign are underpinned by ample liquidity in the domestic banking sector and a strong domestic investor base. The average maturity of public debt was 6.6 years and the weighted average yield was 2.9% in 1H26.
Snap Elections, Continued Government: The incumbent Labour party, led by Prime Minister Robert Abela, won the snap elections in April 2026 with 52% of the votes. This was Labour's fourth consecutive victory. The opposition National Party increased its vote share to 45% from 42% in the previous election in 2022 under the new leadership of Alex Borg.
Deteriorating Governance Indicators: Malta's World Bank Governance Indicators (WBGI) have deteriorated significantly since 2013, to the 71st percentile in 2024, the latest available data, from the 84th. All six subcomponents declined significantly, but the ranking for control of corruption had the largest drop, almost 20pp over the period.
Solid External Finances: Eurozone membership mitigates external risks for the very small, open Maltese economy. The net international investment position is large and estimated at about 80% of GDP at end-2025, while the current account surplus exceeded 8% of GDP in 2025, underpinning the growth momentum and external competitiveness of the economy.
Sound Banking Sector: Malta's banking sector remains resilient, with robust capitalization, abundant liquidity and solid asset quality. The sector's healthy performance is underpinned by continued growth in loans to residents. Asset quality strengthened further, with the sector non-performing loan ratio falling to 1.7% at end-2025, in line with the EU sector average. Banks' tight underwriting mitigates vulnerability to their large concentration in the construction and real estate sector but pockets of risk remain.
Capitalization is strong with a common equity Tier 1 ratio remaining at around 20%. Profitability is expected to moderate further as interest margins normalize, although continued double-digit credit growth and modest fee expansion should provide support.
ESG - Governance: Malta has an ESG Relevance Score (RS) of '5[+]' for Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the WBGI have in our proprietary Sovereign Rating Model. Malta has a high WBGI ranking at 71.4, reflecting its long record of stable and peaceful political transitions, well established rights for participation in the political process, strong institutional capacity, effective rule of law and a relatively low level of corruption.