Malta has retained its A (high) long-term sovereign credit rating with a stable outlook, according to Morningstar DBRS, reflecting continued confidence in the country’s economic resilience despite a more uncertain global backdrop.

The rating agency also affirmed Malta’s short-term ratings at R-1 (middle), showing a broadly balanced risk environment, with solid domestic performance offset by rising external vulnerabilities.

Resilient growth supported by services and domestic demand

Malta’s economic performance remains a key pillar supporting its creditworthiness. Real GDP expanded by 4.0 per cent in 2025, moderating from 6.2 per cent in 2024 but still outpacing many European peers.

Growth continues to be driven by strong domestic demand and service exports, particularly tourism, with arrivals increasing by 12.9 per cent over the year.

Looking ahead, projections from the Central Bank of Malta suggest sustained momentum, with GDP expected to grow by 3.7 per cent in both 2026 and 2027. Private consumption is forecast to remain robust, supported by employment growth and planned income tax reductions for families.

However, the report flags growing downside risks linked to global developments, particularly disruptions in energy markets following geopolitical tensions. While Malta has limited direct exposure to the Middle East, weaker global growth could weigh on export demand.

Fiscal consolidation continues amid structural pressures

Malta’s fiscal position has improved in recent years, with the deficit narrowing to an estimated 3.0 per cent of GDP in 2025, down from 4.4 per cent in 2023.

This consolidation has been driven by strong tax revenue growth, supported by both economic expansion and improved tax collection efficiency. Corporate income tax receipts have played a particularly important role, reflecting Malta’s attractiveness to international businesses.

Projections indicate further gradual improvement, with the deficit expected to decline to 2.4 per cent by 2027.

Nonetheless, the fiscal outlook remains exposed to risks. The government’s policy of maintaining fixed domestic energy prices could increase subsidy costs if global prices remain elevated, placing additional pressure on public finances.

Longer-term challenges include potential changes to international corporate taxation and rising expenditure needs linked to infrastructure and climate transition.

Moderate debt and strong banking sector underpin stability

Malta’s public debt remains moderate at around 46.5 per cent of GDP, comparing favourably with many euro area peers and providing fiscal space to respond to shocks if necessary.

The banking sector also continues to support financial stability, benefiting from strong capital and liquidity buffers. Non-performing loans remain low at around 2.0 per cent.

However, exposure to the property market remains a key structural risk, with over 70 per cent of lending tied to real estate-related activities.

External position remains a key strength

Malta maintains a strong external position, supported by a large current account surplus of 8.6 per cent of GDP in 2025.

This reflects the strength of service exports, particularly in tourism and internationally oriented sectors such as online gaming, which more than offset persistent deficits in goods trade.

The country also retains a substantial net external creditor position, reinforcing its resilience to external shocks.

Governance reforms remain central to long-term outlook

The rating agency highlights Malta’s euro area membership and stable political environment as important credit strengths, with policy continuity expected ahead of the next general election.

At the same time, it notes that further progress in governance, particularly in areas such as judicial efficiency and control of corruption, would support a stronger credit profile.

Continued improvements to the anti-money laundering framework are also seen as essential to safeguarding Malta’s reputation as an international financial centre, following its exit from the Financial Action Task Force grey list in 2022.

Outlook balanced but sensitive to external shocks

Morningstar DBRS indicates that an upgrade could be driven by stronger fiscal outcomes and improved resilience to external shocks, while a downgrade could result from deteriorating public finances or weaker institutional quality.

Overall, Malta’s investment case remains supported by solid macroeconomic fundamentals, though the evolving global environment introduces a more cautious near-term outlook.