Reuters logo
Fitch: Malta's Budget Surplus Underscores Fiscal Progress
May 4, 2017 / 9:54 AM / 7 months ago

Fitch: Malta's Budget Surplus Underscores Fiscal Progress

(The following statement was released by the rating agency) LONDON, May 04 (Fitch) Malta's 1% of GDP budget surplus for 2016 underscores our view that the public debt/GDP ratio is on a downward trajectory, Fitch Ratings says. We do not believe the early general election called this week is likely to significantly affect fiscal settings. Recent Eurostat data showed that Malta recorded a 1% budget surplus last year, following a 1.3% deficit in 2015. Fitch had forecast a 0.7% 2016 deficit. The better-than-expected outcome was driven by both rising revenues (up 4.5%) and falling spending (down 1.4%). The biggest contributors to higher revenues were market output and income tax, which increased by EUR154.3 million and EUR138.4 million respectively, according to the National Statistics Office. Social security contributions and indirect tax revenues also rose. A 38.2% fall in capex, reflecting lower utilisation of EU funds and associated capital spending, drove the fall in spending. Current expenditure rose 4.6%. The 2016 surplus continues the fiscal improvement seen in recent years, which has been driven by robust economic growth (including retrospective revisions to national accounts), falling unemployment and additional indirect tax measures. We do not believe that Prime Minister Joseph Muscat's decision to call a snap election for 3 June, one year before his term was due to end, will result in a major change in fiscal settings. Muscat's announcement on Monday followed opposition calls for his resignation over allegations by a blogger that his wife owned an offshore company in Panama. We think that Muscat's Labour party and the opposition Nationalists (who currently trail Labour in opinion polls) share a broad commitment to fiscal responsibility. The Nationalists' most recent pre-budget document dated October 2016 contained proposals for expansionary fiscal measures but these were coupled with reforms to contain public spending. The Fiscal Responsibility Act of 2014 enacted EU fiscal rules; established an independent fiscal council; and provided for the publication of a Medium-Term Fiscal Policy Statement and Fiscal Policy Strategy and the building-up of a contingency reserve. Structural fiscal efforts have been modest in recent years, with the public-sector wage bill and expenditure on goods and services increasing rapidly in 2013-2015, although the proportion of GDP spent on social benefits has been reduced by nearly 1pp since 2013. Efforts to improve tax collection, increase excise duties and reduce expenditure on social benefits should support a positive fiscal structural adjustment in 2017-2018. The 2016 surplus helped bring debt/GDP below 60%. This is still somewhat higher than the 'A' category median, but we forecast the ratio to fall steadily over the rating horizon, narrowing the gap to ratings peers. Risks to our forecasts include an unexpected growth shock, long-term spending pressures related to ageing, and government guarantees and contingent liabilities. The authorities are moving to address some of these challenges. Planned structural fiscal adjustment should build up additional fiscal headroom, and several pension reforms have been passed. Contingent liabilities have declined from 15.1% of GDP at end-2015 to 14.1% of GDP at end-2016 and are set to decrease further, to an estimated 9.7% of GDP by end-2017 when the temporary guarantee provided to ElectroGas for the construction of a new power station expires. Our view that the public debt/GDP ratio is on a downward trajectory and that economic growth will keep outperforming similarly rated peers is reflected in the Positive Outlook on Malta's 'A' sovereign rating. Contact: Marina Stefani Associate Director, Sovereigns +44 20 3530 1809 Fitch Ratings Limited 30 North Colonnade London E14 5GN Michele Napolitano Senior Director, Sovereigns +44 20 3530 1882 Mark Brown Senior Analyst, Fitch Wire +44 20 3530 1588 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Related Research Malta here Western Europe Sovereign Credit Overview here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below