Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies / ForexCryptocurrenciesEconomic EventsPress releases

Fitch cuts UK's rating on coronavirus debt surge

share with twitter share with LinkedIn share with facebook
share via e-mail
03/28/2020 | 04:52am EDT
A usually crowded Canary Wharf is seen at lunchtime in London

LONDON/BENGALURU, India (Reuters) - Ratings agency Fitch cut Britain's sovereign debt rating on Friday, saying the country's debt levels would jump as the government ramped up its spending to offset the near shutdown of the economy in the face of coronavirus.

Fitch downgraded the country by one notch to 'AA-' - the same level as its rating for Belgium and the Czech Republic - from 'AA' and said a further cut could follow as it kept the rating on negative outlook.

"The downgrade reflects a significant weakening of the UK's public finances caused by the impact of the COVID-19 outbreak and a fiscal loosening stance that was instigated before the scale of the crisis became apparent," Fitch said.

"The downgrade also reflects the deep near-term damage to the UK economy caused by the coronavirus outbreak and the lingering uncertainty regarding the post-Brexit UK-EU trade relationship."

Facing what some economists say could be Britain's deepest recession in a century after the government ordered many businesses to close to slow the spread of coronavirus, finance minister Rishi Sunak has announced a string of stimulus measures to try to prevent a surge in unemployment.

"We have taken unprecedented action to support people, businesses and our vital public services through this crisis. These are the right steps to protect our economy against lasting damage," a spokesman for the Treasury said on Saturday in response to the Fitch rating cut.

"Our public finances are sound after 10 years of bringing debt and borrowing under control. These measures are temporary and will lead to a short-term increase in borrowing."

Central to Sunak's plan is a commitment for the state to pay 80% of the wages of workers who are temporarily laid off.

The Bank of England, like other central banks around the world, has also jumped into action, expanding its bond-buying programme by a record 200 billion pounds and cutting its main interest rate to a record low 0.1%.

Fitch said the measures were necessary to cushion the economy but it now expected Britain's public debt, as a share of gross domestic product, would rise to 94% in 2020 and 98% in 2021, from 84.5% in 2019.

"Over the medium term, we expect public debt to peak at well above 100% of GDP beyond 2025 assuming a gradual reduction in fiscal deficits and trend GDP growth of 1.6%," it said.

Fitch said the coronavirus shutdown was likely to mean Britain's economy shrinks by nearly 4% in 2020, assuming that the drastic containment measures can be relaxed in the second half of the year, leading to a 3% bounce in growth in 2021.

"However, with so much depending on the extent and duration of the coronavirus outbreak, there is material downside risk to these economic forecasts," it said.

Doubts about Britain's future trading ties with the European Union posed a further risk, Fitch said.

Britain's former top-notch AAA rating has been cut steadily over the past seven years as the country struggled to bring down debt levels that doubled after the global financial crisis and then voted to leave the European Union, weighing on its long-term growth prospects in the eyes of the ratings agencies.

By William Schomberg and Aditi Sebastian

Stocks mentioned in the article
ChangeLast1st jan.
BYD COMPANY LIMITED 0.00% 47.7 End-of-day quote.22.78%
RISE, INC. 0.00% 23 End-of-day quote.-23.33%
THE LEAD CO., INC. -1.01% 391 End-of-day quote.0.26%
WORLD CO., LTD. 1.06% 1628 End-of-day quote.-39.50%
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news "Economy & Forex"
11:32aDEUTSCHE BANK FACES ACTION FROM NY REGULATORS OVER EPSTEIN TIES : sources
RE
11:27aOPEC+ keen to keep U.S. shale in check as oil prices rally
RE
11:23aFiat to test automatic switch to electric mode for its hybrid cars in Turin
RE
11:22aCanadian dollar posts 3-month high as BoC scales back crisis operations
RE
11:21aForeign Exchange and Liquidity and Monthly Balance Sheet, May 2020
PU
11:21aSEVERSTAL : invests in 22.5% reduction of atmospheric emissions at CherMK
PU
11:18aFrance nears 1-billion-euro crisis fund for aero suppliers - sources
RE
11:16aREQUEST FOR PROPOSAL CENTRAL BANK OF THE BAHAMAS NEW PREMISES PROJECT : Building Maintenance (High Reach) Consultancy Services
PU
11:16aNEWS HIGHLIGHTS : Top Global Markets News of the Day
DJ
11:16aNEWS HIGHLIGHTS : Top Financial Services News of the Day
DJ
Latest news "Economy & Forex"