Malta's economy this year (2016) is expected grow by some 4.1% according to the latest report by Moody's Investor Service. This is thanks to solid consumer spending and ongoing investment in the island's thriving economy.
Moody's report, entitled "Government of Malta -- A3 Stable: Annual Credit Analysis" is available on www.moodys.com.
Moody's forecast for Malta predicts moderate economic growth, exceeding the average for the rest of Europe. "Core drivers of Malta's economy are domestic consumer demand and investment, with tourism rising 6% in 2015," says Evan Wohlmann, an Assistant Vice President -- Analyst at Moody's.
In Moody's view, Malta's government has also made significant progress on reforms in the energy sector and the labour market, in line with recommendations from the IMF and the European Commission. However, it is too early to conclude that these policy initiatives have met their intended objectives. Moody's notes that while a credit challenge is Malta's relatively high general government debt burden, fiscal consolidation is progressing. Moody's expects debt-to-GDP to fall below 60% by 2017, based on the fall in Malta's fiscal deficit to 1.5% of GDP in 2015 and a likely further decline in the deficit in 2016-17.
Another key credit constraint is Malta's reliance on domestic sources of funding, which makes it vulnerable to the health of the banking system. However, the rating agency assesses risk emanating from the banking sector as 'low', balancing the system's significant size against the low contagion risk between constituent segments, with international banking activities largely insulated from the domestic system.