Article by Kieran Degiorgio
The international landscape, across a variety of facets, has been getting choppier over recent weeks, with this prompting a ‘risk-off’ environment across financial markets as investors re-priced an array of risks in relation to AI, inflation, fiscal debt burdens and geopolitics.
Global equity markets sold off on a renewed wave of scepticism surrounding the return on AI investments along with the sustainability and cost of such capital outlays. Fixed income has been pressured by an acceleration in inflation, hawkish central banks along with worries surrounding public sector spending.
Tensions in the Middle East have flared up once again, prompting Oil to reprice higher to around and above USD 100/bbl. Closer to home, domestic political risk is on the rise across some of the biggest EU member states. Riots are now a daily occurrence in France and Italy. Spain's prime minister Pedro Sánchez called a snap election after a new housing law was pushed back, and in Germany, the AfD (Alternative for Germany) gained considerable ground in the recently held state elections.
An uninformed spectator would expect immediate negative repercussions across the local socio-economic landscape. But no, when looking at the Maltese economy, at the country’s fiscal trajectory, at Maltese capital markets, one would hardly notice a blip, at least from a top-down perspective.
The country’s fiscal situation remains on solid footing, with Malta’s Debt/GDP ratio clocking in at a conservative 47% as at June of 2026, as per the National Statistics Office’s (“NSO”) official figures, well below the Euro Area average of around 90%. This allows the government to maintain a moderately supportive fiscal stance as evidenced in this week’s Budget for 2027, where a variety of tax cuts and consumer-oriented growth friendly incentives where announced.
Maltese households are also well protected at the pump as energy prices have been kept stable for local end-users, in contrast to what can be observed internationally, where consumers’ finances are coming under increased strain.
As per the Central Bank of Malta’s latest projections, local real economic growth is expected to clock in at around 3.6% per annum over the upcoming years, while inflation, is expected to remain stable at its current levels of around 2.4%. Both better positioned versus Euro Area averages. Labour market conditions are also robust, with unemployment at 3.4% as at August as per the NSO. Tourism, a key economic pillar, is booming and experiencing record levels of growth.
Credit is available, and is relatively cheap, with local bank’s base lending rates and capital market pricing remaining, thus far, stable, against the higher repricing observable internationally. The Maltese political scene promises continuity, for better or worse, with this being often a supportive factor for private sector confidence as it decreases uncertainty.
Maltese sovereign debt is strongly rated, and strongly bid for, as can be observed by an increase in international institutional participation in the Treasury’s auctions for new bond issues.
Local markets, both on the side of equities and bonds, have proved relatively resilient as of late, muting the downside volatility observable overseas. While this is partly driven by the market’s illiquid nature, from a technical perspective, the positive implications on risk-adjusted returns are still appreciable, especially when considering a strong contribution to total returns through income, both in terms of dividends and coupon payments.
So have our markets and economy become a Mecca for investors seeking a ‘safe-haven asset’, which generates attractive returns and is uncorrelated to anything that happens around it? The perfect diversifier? Not entirely.
The population increase fuelled economic expansion over the past years is exerting a tangible strain on the country’s infrastructure.
Traffic, in spite of continued investment in our road network, remains highly problematic, with this having negative repercussions on productivity and efficiency. Power cuts, especially during peak demand summer months, are representative of a system operating at capacity. Outcries about the risks of over-development and worries surrounding good governance are aplenty, while housing affordability and pressures on our healthcare system are other pain points. All of these factors, amongst others, are trickling down into what many argue to be a life of lower quality overall.
Longer term, the sustainability of Malta’s economic model warrants attention and careful consideration, with a needed shift in focus towards the generation of higher value added industries and jobs, along with considerable improvements in productivity and technological innovation.
Over the coming years however, while acknowledging such risks, the beat of the drum suggests a continuation of the positive trajectory experienced over the recent past, with those willing to ride the wave and take well informed calculated risks most likely to reap the benefits.
Kieran Degiorgio is a Senior Portfolio Manager and Research Analyst at Curmi & Partners Ltd.
The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi & Partners Ltd, with registered address Finance House, Princess Elizabeth Street, Ta Xbiex, Malta XBX 1102, is a member of the Malta Stock Exchange and is licensed by the Malta Financial Services Authority (“MFSA”) to conduct investment services business.