WASHINGTON – Fitch Ratings yesterday 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 public finances, with Fitch forecasting the fiscal deficit to materially widen this year and government debt set to increase to well over 120% of gross domestic product over the next few years”, said the agency in a statement.
Fitch saw Britain’s deficit climbing to 17.7% of GDP this year from 2.2% 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% of GDP by next year and below 10% in 2022.
The forecast comes after 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 and curb a rise in coronavirus cases.
Such measures “are modest, and in our view, could slow, but not stall the economic recovery”, said Fitch, though they may be tightened if Covid-19 cases do not 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. – AFP, September 26, 2020
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