Scope Ratings maintains A+ credit outlook for Malta, grey listing not a concern

The FATF grey listing has limited effect on Malta’s credit outlook from Scope Ratings

Malta retained its A+ credit outlook from German rating agency Scope Ratings, while the recent FATF grey listing will have a limited effect on its credit outlook.

“Deficiencies in the AML/ CFT framework are already captured in the current A+/Stable rating through our qualitative assessments of financial stability risk,” said Thibault Vasse, an analyst at Scope.

“However, the grey listing could impact Malta’s sovereign ratings if associated reputational costs jeopardise the government’s ability to boost the economic recovery and support its fiscal consolidation.”

While the effect looks limited for now, a prolonged grey listing could still diminish Malta’s attractiveness as an investment destination and hit important growth sectors such as igaming and financial services.

A recent EY Attractiveness Survey found that only 37% of foreign investors deem Malta attractive for FDI, with most respondents citing the FATF grey listing as a major concern.

Scope Ratings said Malta made good progress in strengthening its AML/CFT frameworks by allocating more resources to regulatory, supervisory and investigative agencies.

It noted too that funding and staffing for AML/CFT increased by 17% and 46% respectively across 2018 and 2020.

“The government has demonstrated its willingness and ability to enhance financial oversight and regulatory frameworks in recent years,” Vasse said.

“This positive momentum must be maintained to ensure Malta’s robust growth potential of around 3,5% and solid public finances characterised by consistent primary surpluses and declining debt-to-GDP pre-COVID.”

Scope Ratings expects a quick economic recovery from Malta, while public debt is expected to fall downward as from 2023.

“This, coupled with falling debt-servicing costs given current ECB policy, underpins the ratings at the A+ level and supports the Stable outlook,” Vasse said.