Fitch affirms Britain’s AAA credit rating, negative outlook
Fitch Ratings on Friday maintained Britain’s “AAA” credit rating with
a negative outlook, warning that weak economic growth and a rising debt
level was increasing the likelihood of a downgrade.
Fitch said “weaker than expected growth and fiscal outturns in 2012
have increased pressure on the UK’s ‘AAA’ rating”.
With Fitch estimating that Britain’s debt in 2015-2016 may approach
100 percent of gross domestic product (GDP), the limit for a top “AAA”
rating “the likelihood of a downgrade has therefore increased.” It said
the negative outlook reflects Britain’s “very limited fiscal space, at
the ‘AAA’ level, to absorb further adverse economic shocks in light of
the UK’s elevated debt levels and uncertain growth outlook.” Fitch had
put Britain’s rating on negative outlook, or subject to downgrade, in
March.
Given the uncertainties of the fiscal and economic projections Fitch
said it did not expect to resolve its negative outlook on Britain’s
rating until 2014.
However it warned a downgrade was likely if Britain’s medium-term
growth outlook worsened, there were indications that government debt
would exceed 100 percent of GDP, or an easing of fiscal policy that
pushes back a reduction in debt levels.
“Global economic headwinds, including those emanating from the
on-going eurozone crisis, have compounded the drag on UK growth from
private sector deleveraging and fiscal consolidation as well as from
depressed business and consumer confidence, weak investment, and
constrained credit growth,” said Fitch.
The ratings agency said it now expects Britain’s economy to contract
by 0.3 percent in 2012 compared to an expectation of growth of 0.8
percent when it last formally reviewed the country’s rating in March.
Fitch now forecasts that a weak recovery will begin in 2013 and that
Britain’s output is not expected to surpass its 2007 pre-crisis peak
until 2014.
AFP |