Should investors consider Malta and Portugal: state credit ratings

November 24, 2020
Credit rating of Portugal and Malta in 2020
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Experts predict stable development for the economies of both countries despite the crisis in 2020.

The international Fitch agency has confirmed the credit rating of Portugal – the country’s economy has been assigned the BBB index. The German agency Creditreform has assigned Malta an A+ rating.

Credit agencies use alphabetical indices when assigning credit ratings to countries. Fitch and Creditreform use a scale from D to AAA. D stands for default or total bankruptcy of the economy, AAA is the highest degree of creditworthiness and exceptional resilience of the economy. Fitch rated Lebanon worst in 2020, with the highest AAA index being given to the USA, Germany and Switzerland, for example.


A sustainable economy makes Portugal and Malta attractive countries for investment. Credit agency estimates support the European Commission’s forecast. In its report, it noted that the GDP of Portugal and Malta will begin to grow from 2021.

The economy will recover when borders open and tourist inflows resume. We talked about this in the material “European Commission: the EU economy will start to grow from 2021”.

Portugal: what will happen to its economy in 2020-2022

Fitch Rating Agency is one of the “Big Four” consulting companies in the world. Investors take into account the agency’s estimates and forecasts when choosing a country to buy real estate, conduct business and invest in the economy.

In November 2020, Portugal received the BBB credit rating. This means that the country’s economy is not threatened by default, and growth and sustainable development are expected in the long term.

Fitch analysts highlighted the successful fiscal policy pursued by the Portuguese government. Tax benefits, payments and government loans supported the business in the crisis. Experts also predict that public debt will begin to gradually decline from 2021.

7.1% of Portugal’s GDP comes from tourism. GDP will decrease by 2020, but will gradually start to grow from next year.

Portugal's GDP in 2020-2022

Прогноз по ВВП Португалии в 2020—2022 годах
Source: Fitch Ratings, 2020.

The forecast meets the expectations of the Portuguese business. A research study by another major consulting agency, Deloitte, showed that 56% of company executives and top managers expect the economy to grow from 2021. However, 35% of respondents are optimistic about the future: they believe that GDP will grow by more than 3%. We talked about this in the material “Portugal has collected 26 World Travel Awards and has become the most comfortable holiday destination in Europe”.

Malta: high rating despite the crisis

The German rating agency Creditreform is one of the largest in the European Union. It has been evaluating the region’s economies since 2011 and is supervised by the European Securities and Financial Markets Authority.

In November 2020, Malta received the agency’s A+ credit rating. The Index shows the high financial strength and creditworthiness of the state. In the long term, the Maltese economy will grow steadily.

Creditreform experts noted that Malta’s economy had been growing rapidly for several years before the pandemic. The country is repositioning itself to export goods and services and is making good use of financial assistance from the European Union. These factors allowed analysts to confirm the country’s high rating.

Malta is still heavily dependent on tourism. The industry accounts for 12.8% of the country’s GDP. Therefore, during the first wave of the pandemic, from March to May 2020, the economy fell by 11.6%. The decline in tourism revenue is the main reason for the overall decline in the country’s GDP in 2020.

The Agency forecasts that GDP will fall by 8.2% in 2020. At the same time, the growth in 2021 will amount to 4.5%. This figure is higher than the estimates of the European Commission, which forecasts a GDP growth of just 3%. Experts attribute economic recovery to the gradual removal of quarantine and, as a result, the resumption of tourism.

What impact will the economic situation have on investment programmes

Portugal and Malta have stable economies, which is confirmed by their credit ratings. But in the event of new economic shocks, countries may need additional financial support. In our view, such support can ensure that foreign investment flows, for example through residence permit programmes, are made possible.

Portugal issues residence permits for investments from 250 000 €. From January to July 2020, the programme brought the country €439 million, only 6.7% less than for the same period in 2019. We talked about this in the material ‘Residence permit for Portugal: statistics for the first 7 months of 2020’.

The Government of Portugal allows participants in the investment programme to apply for national citizenship in 5 years. This is one of the quickest ways to obtain EU citizenship. Therefore, the residence permit program of Portugal is in high demand among foreign investors.

Malta is undertaking anti-money laundering reforms, which was separately noted by Creditreform experts. The changes have a positive impact on the country’s reputation among investors and business people.

There are two residence permit investment programmes in Malta – residence permit and permanent residence permit. At the same time, the Department conducts one of the most stringent due diligence of investors in the world, which is not passed annually by about 25% of applicants..

A residence permit in Malta is issued for investments from € 220,000. The investor needs to buy or rent a house on the island, pay a one-off fee and pay annual income tax. Programme participants are not required to reside permanently in Malta, but cannot stay in another country for more than 183 consecutive days.

Participation in the Permanent Residence Program in Malta requires large investments. An investor also buys or rents accommodation and pays a fee. But they also need to purchase government bonds worth from € 250,000 or more. An additional condition for participation is to confirm that the investor has an annual income of 100,000 € or that he or she has assets totalling from 500,000 €.

On 20 November 2020, Malta amended its Citizenship Act. Now citizenship can only be obtained by naturalisation based on direct investment. However, an investor first applies for a residence permit in the country and is only allowed to apply for citizenship after 1 or 3 years. We talked about the new provisions of the law in the material “Malta has changed the law: who and how can now obtain a passport of Malta”.

The amendments have been adopted to ensure full compliance with European Union law. In our opinion, strict conditions will not affect the interest of foreign investors in obtaining citizenship for special merits. Demand will be high, also due to the economic stability in the country.

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