VALLETTA (MALTA) (ITALPRESS/MNA) – Malta’s strong economic growth continues to be undermined by rising government spending and institutional weaknesses, credit rating agency Moody’s has warned, while affirming the country’s A2 credit rating with a stable outlook.
In its latest assessment, Moody’s forecast the fiscal deficit to widen to 2.8% of GDP in 2026, up from 2.1% in 2025, before easing slightly to 2.7% in 2027.
The agency attributed the expected increase to continued energy subsidies, higher social security expenditure and growing public investment.
Energy subsidies alone are projected to cost approximately €400 million in 2027, equivalent to 1.4% of GDP.
While acknowledging that the subsidies have protected households and businesses from volatile international energy prices, Moody’s warned that they transfer energy market risks onto government finances.
Measures announced in the 2027 Budget, including higher tourist contributions and work permit fees, could partially offset the additional expenditure, it added.
Despite these fiscal pressures, Moody’s expects Malta’s economy to maintain strong growth, forecasting GDP expansion of 4.1% in 2026 and 3.7% in 2027, following growth of 4.7% in 2025.
Tourism, financial services, remote gaming and information technology were identified as key contributors to the economy’s resilience.
The agency also noted that inflation remained relatively contained, averaging 2.2% during the first nine months of 2026, below the euro area average of 2.8%.
Government debt is expected to increase marginally from 46.3% of GDP in 2025 to 46.8% in 2026, remaining at that level in 2027.
However, Moody’s highlighted persistent concerns over the rule of law, corruption and institutional capacity.
Referring to the European Commission’s 2026 Rule of Law report, it pointed to limited progress in judicial independence, court efficiency, high-level corruption cases, access to information and public participation.
The agency said these institutional shortcomings continue to constrain Malta’s credit profile despite its strong economic performance.
Improvements in the rule of law and the control of corruption could support a future rating upgrade, while a structural deterioration in public finances, particularly alongside weaker economic growth, could trigger a downgrade.
Prime Minister Robert Abela welcomed the assessment, highlighting Moody’s recognition of measures included in the 2027 Budget.
– photo IPA Agency –
(ITALPRESS).
