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NEWS maltatoday | SUNDAY • 5 AUGUST 2018 LARGER tax revenues and pro- ceeds from the sale of Maltese citizenship, coupled with low- er capital spending, will keep Malta's surplus at 1% of GDP in 2018, the credit rating agency Fitch said. Malta's rating was affirmed at A+ by Fitch, with a stable outlook thanks to its robust economic growth. It said revenues would de- cline by 1.7 points to 38.7% of GDP as inflows from the IIP moderate while spending will increase by 1.2pp to 37.7% of GDP due to a capital injection into Malta Air Travel Ltd for the purchase of landing slots from Air Malta (0.5% of GDP). Fitch also said that while World Bank governance in- dicators exceeded the 'A' me- dian for Malta and were com- parable with the 'AA' median, the "rule of law" subcompo- nent of the governance indi- cators is on a declining trend. Malta's Ease of Doing Busi- ness was also weaker than the 'A' median, ranking 84th out of 190 in 2018. Fitch said debt dynamics were also strong, with low in- terest payments and recurrent primary surpluses that was pushing down gross general government debt to 47.2% of GDP in 2018, and further down to 40.9% in 2020. Contingent liabilities de- clined to 9.6% of GDP at-end 2017 following the expiration of the Electrogas guarantee in 2017, from 13.7% at-end 2016. Real growth will be strong at 5.6% in 2018 thanks to an in- crease in consumption and in investment, as well as strong performances by the remote gaming, tourism and financial services sectors. Fitch esti- mates Malta's medium-term potential growth at 3%, but is more conservative than the European Commission's lat- est forecast in the 3.5%-5.2% range in 2022, as they expect pressures on the infrastruc- ture and rising labour short- ages will constrain the expan- sion of the economy in the medium term. Fitch said price pressures are increasing, given a tightening labour market, but inflation will remain contained at 1.6% in 2018 as the strong inflow of foreign workers and rising labour participation will pre- vent a sharp increase in wages. Property prices rose 5.3% in 2017, and advertised prices rose 11.8%, boosted by strong housing demand, a booming tourism sector and exemp- tion of stamp duty for first- time buyers. Fitch said that increasing housing supply should help curb the rise in property prices. It also said Malta's banking sector remains sound, with core domestic bank assets ac- counting for 206% of GDP, non-core domestic banks' assets representing 19.7% of GDP and international banks' assets at 205% Non-performing loans (NPLs) accounted for 4.1% of total loans (5.3% in 2016), although legacy resident cor- porate NPLs of core domestic banks remained high at 11%. "Risks stem from the high and rising exposure to the housing market, with mortgage lend- ing accounting for 48.3% of the total lending to residents. Lending standards to house- holds remain prudent, also due to households' net worth with a loan-to-value ratio for residential properties at 73.5% in 2017 and debt service-to- income ratio at 23%." Fitch affirms A+ rating for Malta