The fall of the Maltese government does not pose short-term risks to Malta's 'A+' rating, Fitch Ratings says.

"Any impact on 2012 budget out-turns should be minimal, and recent fiscal data suggests that the government deficit will be 2.6% of GDP this year, in line with our forecast," the agency said.

"In our most recent rating review, we highlighted the risk that the 2013 budget might not pass, and that in the event of early elections, fiscal slippage in 2012 was likely to be wider than our baseline, as the government would need to adjust expenditure in H212. But the review of ministerial spending allocations in the second half of this year and the good revenue performance should ensure that our forecast, which already incorporates moderate fiscal slippage compared with the government's revised target of 2.3%, should be met.

"The impact could be more significant in 2013. With no budget approved, the 2012 budget will apply for no more than four months, with expenditure allocations equivalent to one-third of the 2012 budget. This should ensure expenditure restraint in the first quarter of 2013.

"We forecast a general government deficit of 2.2% of GDP in 2013, which would be consistent with Malta's rating. The 2013 budget targeted a deficit of 1.7% ofGDP. Our forecast assumes that the election outcome will not disrupt the medium-term objective of fiscal policy, which is to balance the central government budget and stabilise the public debt ratio.

"Should post-election fiscal policy significantly fail to achieve this, it could have negative rating implications."

Fitch noted that the Labour Party, 'which appears to be the favourite to win the next elections', had announced it will maintain the 2013 budget measures.

"This stance should give certainty to European partners and investors about Malta's commitment to fiscal consolidation."

Fitch affirmed Malta's rating at 'A+' with a Stable Outlook on 25 September 2012. This reflects the resilience of Malta's economy and financial sector, a strong budgetary position, and a secure domestic investor base for fiscal funding.