Fitch holds UK debt at AA-, outlook negative
Fitch Ratings on Friday left Britain’s debt rating unchanged at AA- and the outlook at negative, after downgrading both in March on fears of economic damage from Covid-19.
The affirmed negative outlook “reflects the impact the coronavirus pandemic is having on the UK economy and the resulting material deterioration in the public finances, with Fitch forecasting the fiscal deficit to materially widen this year and government debt set to increase to well over 120 percent of GDP over the next few years,” the agency said in a statement.
Fitch saw Britain’s deficit climbing to 17.7 percent of GDP this year from 2.2 percent in 2019, an increase well above that seen during the 2008-2010 global financial crisis, which the agency blamed on the slowdown in economic activity and government measures to fend off the pandemic.
The deficit is predicted to drop back to about 12 perent of GDP by next year and below 10 percent of GDP in 2022.
The forecast comes after British Prime Minister Boris Johnson earlier this week announced a raft of new restrictions in England, mirrored to varying extents in other UK nations, to try to curb a rise in coronavirus cases.
Such measures “are modest and, in our view, could slow but not stall the economic recovery,” Fitch said, though they could be tightened if Covid-19 cases don’t decrease.
Adding to the uncertainty is Britain’s process of negotiating a new trade agreement with the European Union following its departure from the bloc, which Fitch predicted is “likely to curtail the pace of recovery” for the rest of the year.