Malta has retained its A (high) credit rating with a stable outlook from international ratings agency Morningstar DBRS, underscoring the country’s economic resilience and strong financial fundamentals.

In its latest assessment published on 10th October, the agency reaffirmed Malta’s long-term and short-term ratings at A (high) and R-1 (middle), respectively, citing the country’s eurozone membership, robust banking sector, and solid external position as key strengths.

Prime Minister Robert Abela welcomed the affirmation, describing it as “testament to our economy’s resilience.” He noted that Malta’s decision to avoid austerity measures during recent global turbulence “is paying off, with strong economic dynamics lowering the fiscal deficit and debt.”

Fiscal and Economic Performance

DBRS reported that Malta’s budget deficit narrowed to 3.6 per cent of GDP in 2024, above the EU average of 2.1 per cent. The deficit is forecast to improve gradually to 3.4 per cent in 2025 and 3.0 per cent in 2026, supported by sustained growth in services and tourism.

The agency cautioned, however, that fiscal consolidation is being slowed by continued energy subsidies – forecast to cost 0.7 per cent of GDP in 2025 – and income tax reductions equivalent to 0.5 per cent of GDP.

Malta’s public debt remains moderate, standing at 46.2 per cent of GDP in March 2025 and expected to rise only marginally to 48.7 per cent by 2026. About 79 per cent of government debt is held domestically, primarily by Maltese banks, reflecting a stable funding base.

Economic growth is expected to remain solid but slower than in previous years. After expanding by 6.8 per cent in 2024, real GDP growth eased to 3.1 per cent in the first half of 2025. The Central Bank of Malta forecasts growth of 3.9 per cent in 2025, followed by 3.5 per cent in 2026 and 3.3 per cent in 2027.

Tourism continues to be a major driver of the economy, with visitor arrivals rising by 12.1 per cent during the first seven months of 2025.

Banking and Structural Indicators

Malta’s banking sector remains well-capitalised, with low levels of non-performing loans. DBRS highlighted, however, that the system’s exposure to the property market – where construction, mortgage, and real estate loans account for over 70 per cent of resident bank lending – poses potential vulnerabilities.

Residential property prices have risen by 29.3 per cent between early 2021 and early 2025, a trend the agency will continue to monitor given its impact on financial stability.

The report also pointed to Malta’s robust external position, with a current account surplus of 5.5 per cent of GDP driven by strong service exports, particularly in online gaming and tourism.

Governance and Policy Outlook

While Malta performs in line with EU averages in areas such as rule of law and accountability, DBRS flagged governance challenges, particularly regarding government effectiveness and control of corruption.

The EU’s excessive deficit procedure, launched against Malta in July 2024, requires further fiscal discipline to ensure alignment with European budgetary rules.

Despite these headwinds, DBRS concluded that Malta’s A (high), Stable rating reflects the country’s resilient growth model, manageable debt levels, and sound banking system. The agency cautioned that persistent fiscal deficits, reliance on foreign labour, and property market risks remain key challenges in the medium term.