“Government reforms targeting bottlenecks” – Moody’s
Credit rating agency Moody’s praised Malta’s economic performance saying Malta’s economy is going forward.
Moody’s highlights higher domestic consumption and last year’s good export performance, as well as major government reforms in the energy sector and labour market, to keep improving Malta’s performance as it reaffirms Malta’s A3 credit rating.
“The Moody’s report confirms the government fiscal and economic policy is taking Malta in the right direction. The overall sentiment in the country is one of optimism. Our policies are trickling down and being felt at every level of society. This is confirmed by Moody’s highlighting of higher domestic consumption, which confirms we are making a positive difference in people’s lives,” said Finance Minister Edward Scicluna.
“This also confirms that budget measures introduced last year resulted in Malta ranking among the UE’s top-performers on economic growth, employment, and unemployment. We shall be looking towards the coming budget to build further on these results.”
In its assessment, Moody’s is expecting a sustained and healthy economic outlook with economic growth rising to 2.7 per cent in 2014, and by a further to 2.8 per cent in 2015. Growth for 2015 is expected to be mainly driven by final consumption and capital formation, the later boosted by the investment in the energy sector.
Moody’s also notes that the deficit-to-GDP ratio is forecasted to fall to 1.7 per cent, while the debt-to-GDP ratio is expected to fall below the 70 per cent in 2015, to 69.7 per cent. Moody’s also expects the primary surplus as a percentage of GDP to increase to 1.1 per cent in 2015.
Moody’s is also foreseeing a positive outlook for the tourism industry, with the industry benefitting from Malta’s central position and good connectivity. Furthermore, Moody’s positively notes that Malta has a good track record of relatively low and stable inflation, remaining broadly in line with the inflation rate of the euro area. On the external side, Moody’s expects the current account to remain in surplus in 2014 and 2015 at 1.0 and 0.8 per cent respectively, driven by continued growth in services exports.
The Minister also welcomes Moody’s positive endorsement of Malta 2015 draft budget plan recently submitted to the European Commission. In this regard, Moody’s remarks that “the Government’s draft budgetary plan for 2015 should put fiscal consolidation on a good footing” and that “budget targets appear to be realistic, as they are built on reasonable macroeconomic assumptions and measures that appear socially acceptable for key stakeholders.”
Minister Scicluna also notes Moody’s recognition of the Government’s efforts to address the factors that are impinging on Malta’s growth, namely inefficiencies in the labour market and the energy sector, by means of measures that facilitate access to work, especially for women and youth, and the much-needed reform and investment in the energy sector.
Moody’s rated Malta’s institutional strength as being “very high” underpinned by the country’s favourable scores on the World Bank governance indicators, as well as by its robust macroeconomic and fiscal policy framework.
Moody’s also recognises the Government’s success in strengthening its fiscal policy and governance “over the past few years in order to support fiscal consolidation and to comply with European requirements, after the country underwent excessive deficit procedures in 2004, 2009 and 2012,” adding that the adoption of the Fiscal Responsibility Act is “a major step” towards fiscal consolidation.
Moody’s furthermore acknowledges Government’s efforts to reduce administrative inefficiencies through the reduction in bureaucracy by the appointment of a Commissioner for the Simplification and Reduction of Bureaucracy, the on-going holistic Justice reform, and the “open Government” approach adopted by this Government.
Moody’s positive reconfirmation of Malta’s A3 rating with a stable outlook joins similar assessments by other international entities such as the European Commission, the International Monetary Fund, and other credit rating agencies such as Standard & Poor’s and Fitch, and which together confirm that Malta is on a strong economic and fiscal footing, and is well-positioned to again meet its economic and fiscal targets for the coming year.
28th October 2014