There are no short-term risks to the economy from Monday’s failed Budget vote, according to an international rating agency.

This stance should give certainty to European partners and investors- rating agency

Fitch yesterday maintained Malta’s A+ rating, saying that any impact on this year’s financial results should be minimal.

With no approved Budget and the country heading towards an election in March, Fitch said the Labour Party’s decision to keep the Budget measures if elected to government should allay any fears of change in policy.

“This stance should give certainty to European partners and investors about Malta’s commitment to fiscal consolidation,” Fitch said, adding the Labour Party appeared to be the favourite to win the election.

It noted that its forecast assumed that the election outcome would not disrupt the medium-term objective to balance the Budget and stabilise public debt.

However, the rating agency warned that should fiscal policy after the election “significantly fail” to achieve the dual objectives of controlling the deficit and debt, “it could have negative rating implications”.

Fitch had affirmed Malta’s A+ rating with a stable outlook in September, reflecting the resilience of the economy and the financial sector, coupled with a strong budgetary position.

Fitch had noted the risk of the 2013 Budget not passing, leading to fiscal slippage in 2012 as a result of an early election.

But a review of ministerial spending in the second half of this year and a good revenue performance should ensure forecasts would be met, Fitch added.

The credit rating agency said that recent fiscal data suggested that government deficit would be 2.6 per cent of GDP this year, in line with their forecast.

Turning its eyes to 2013, Fitch noted that with no approved Budget, the Government could only spend up to a third of current expenditure in the coming four months. This should ensure expenditure restraint in the first quarter of 2013, the agency added.

It is forecasting a deficit of 2.2 per cent in 2013, which is higher than the Government’s target of 1.7 per cent but still consistent with Malta’s rating.

Meanwhile, credit rating agency Moody’s yesterday noted the European Council’s decision last week to close the excessive deficit procedure for Malta.

Moody’s maintained its A3 negative rating but insisted the EU decision confirmed the Government had reduced its deficit below the three per cent threshold.

“The decision is positive as it underscores the Government’s effective efforts towards consolidating the fiscal accounts and ensuring the sustainability of public debt,” Moody’s said.

ksansone@timesofmalta.com