Moody's Investors Service upgraded Malta's outlook to stable from negative comes as no surprise for the Maltese Government. The rating agency also affirmed the country's A3 government bond rating. The agency's decision to revise the outlook on Malta's sovereign rating was driven by a number of key drivers namely:-
1. Moody’s expectation that debt metrics will stabilize in 2014 given an economic recovery and the newly elected government’s commitment to fiscal consolidation;
2. Malta’s lack of funding stress and limited contagion risk from the euro area;
3. The resilience of the Maltese banking system, with banks following a very conservative and traditional banking model that has not presented problems for the sovereign even through the worst of the financial crisis.
Moody’s report after an independent audit of our country’s finances, welcomes what it terms the Maltese “Government’s successful consolidation strategy” and notes that “Government has successfully achieved its goal of reducing the fiscal deficit”. Government has been working hard on the above issues from the very beginning of this legislature. Undoubtedly it has always been committed towards fiscal consolidation and at the same time maintaining its target to reduce fiscal imbalance. Moody's early endorsement that Malta was moving in the right direction is the result of the Government’s continuous hard work on the one hand and responsible and prudent efforts and initiatives on the other. Reducing the country’s deficit to less than 3% in twelve months as opposed to the projected two years and this without impinging further on the citizens’ is in itself proof of the Government’s competence in the economic sector. Various incentives have already been implemented and put into practice by this Government. Of major importance is education.
The Government will be teaming up a number of scholarships with existing courses and new ones aimed at ensuring that graduates and the working population are educationally prepared and trained for emerging opportunities. Also a strategy for Life Long Learning has to be strengthened in order to meet the evolving challenges that are to be faced in the future. The country needs a better learned and skilled population to meet the needs of our economy. Together with MITA this Government embarked on the development of strategy that would address digital economy in Malta with the aim of stimulating the economy, empower economic growth through new ventures, create new employment opportunities and eliminate digital divide.
Government is also focusing and paving the way for more local business to increase their use of modern technology. This will not only enable qualitative employment to grow but will set the scene where local and foreign businesses would want to invest. In this regard MITA is also playing a vital role in developing eBusiness related skills through initiatives such as E-Skills Alliance. This helps our local human resources to strengthen the use and benefits of eBusiness applications. Meanwhile we are applying the potential of our hard-working and talented people to use digital technology in innovative ways.
On the other hand the MCA is supporting eBusiness by means of eCommerce Monitoring and eCommerce Fora. In order to ensure the creation of jobs and importantly qualitative jobs, investment, is indispensable. So far, the response to all of Government’s invitations for expressions for various projects has been over whelming. Of particular importance have been those in relation to the development of the former Malta Shipbuilding Yard into a maritime hub. Malta’s maritime potential will be exploited through these initiatives. Furthermore, this Administration setup the Integrated Maritime National Strategy Committee which its main aim is to develop a sustainable strategy for Government’s vision and goals.
This integrated approach will help instigate the potential of Malta’s marine and maritime sector creating maritime quality jobs and economic growth. Through these aforementioned actions the Government clearly illustrated that this Administration is truly committed towards sustainable blue economy for Malta. Competition from other countries is harsh and Malta must be prepared to achieve its aims with success.
This is why the Government is committed and ready to invest heavily in this industry which directly and indirectly could provide the livelihood for the Maltese people. The Government has also already issued a call for an expression of interest for two casinos, one in Malta and one in Gozo. Said casinos are to be integrated in a project such as a hotel or mall which will itself generate more economic growth. We feel that there is still more space for businesses to grow in the entertainment sector. Economic growth is also intended to occur through the implementation of the recently launched Global Residence Programme whereby people who buy high value property and who pay taxes, would be able to benefit from a residence permit in Malta. As expected, it has been received as a much needed and awaited breath of fresh air for the property industry especially with regards to localities in the southern part of Malta and in Gozo whereby lower criteria apply. The Government is ensuring that the procedures that will operate this program are not bureaucratic and create the least possible disruption to applicants. This initiative effectively reduces the thresholds for the purchase of immovable property and even those renting a property in Malta.
The tax threshold was also lowered to 15,000 Euros. The bond amount of the previous scheme amounting to 500,000 Euros was also removed. Concurrently, the incentives in the global Residence Programme envisage an additional input to other industries such as those of financial services and hospitality. Inevitably, this will be another source of revenue for the Government and at the same time increase employment opportunities in various areas such as lawyers and tax consultants, the Financial Services industry, the leisure and hospitality industry. Most businesses in Malta are family based and many of them are encountering various particular problems. The Government has already started working upon a Family Business Act which will envisage a legal framework that would facilitate the economic and financial activity of these businesses and especially their transmission from one generation to another. Also, it would ensure that they would continue to thrive in an ever increasing competitive market. The fact that our banks have continued to follow a very conservative and traditional banking model has been tantamount to the absence of problems for the Government and this despite the financial crisis.
Moody’s notes that the “core domestic” segment of the banking system continues to report favourable indicators. Although the sector’s size and concentration risk are vulnerabilities, the system is very well capitalized and has a very low reliance on wholesale funding due to its ample liquidity. “High deposit levels (at about 185% of GDP) highlight the amount of domestic wealth available to cover the sovereign’s financing needs and anchor systemic liquidity.” With this backdrop in mind, the Government is seeking other banking schemes of prudent financial nature which would facilitate investment especially by new businesses both local and foreign.
Moody's revised outlook to a stable from negative rating and this just seven months after the general election cannot but boost Malta’s economy and reinforce the general feeling that Malta is really and not merely apparently moving forward. It is without no doubt that the improved rating was only possible through this Administration vision and commitment towards work. The work done during these last months for sure will lay down a solid foundation for this Government to continue striving for a stronger and a more sustainable economy as befits our country. The Government believes that this country deserves to be among the top countries in Europe, thus this will only be achieved through economic growth.
The Hon Dr Edward Zammit Lewis is Parliamentary Secretary for Competiveness and Economic Growth firstname.lastname@example.org