WASHINGTON – Fitch Ratings yesterday maintained Britain’s AA- debt rating and outlook at negative, but warned that rising deficits, the coronavirus surge and the nation’s fraught trading relationship with Europe pose risks.
The affirmed negative outlook “reflects the impact of the coronavirus pandemic on the UK economy and the resulting material deterioration in the public finances”, with the agency saying in a statement that the deficit widened to 16.2% last year.
London’s recent trade deal with the European Union following its departure from the bloc “should limit disruption at borders in the short term”, said Fitch, but warned that “uncertainty remains around how the new trade arrangement will work in practice, and how it will affect the UK’s trade with the EU over time”.
The roll-out of vaccines against Covid-19 could spark a “sustained recovery” beginning in the second half of 2021, and Fitch raised the year’s gross domestic product growth forecast to 5.0% from its previous 4.1%, citing the free trade agreement.
But, the agency warned of a “weak” short-term economic outlook, as Britain grapples with surging Covid-19 cases.
Earlier this month, London imposed a lockdown, and ordered the public to stay at home and work remotely, if possible, and only to go out for essential shopping, medical reasons or to exercise.
That will cause the economy to contract 3% in the first quarter of the year, but Fitch said its recovery in the second quarter could be stronger than before, thanks to the new trade deal. – AFP, January 16, 2021
