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Moody’s – UK’s sovereign rating could be at risk

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by Kay Mitchell

Ratings agency Moody’s has warned that the UK’s AAA rating could be downgraded if slower economic growth impacts on the Government’s plans to reduce the budget deficit.

“Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the U.K.’s sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the U.K.’s debt metrics to deteriorate to a point that would be inconsistent with a triple-A rating,” Moody’s said in a statement.

As a result of the budget deficit reduction plan, economic growth has been lowered and Moody’s is now forecasting growth of 1.6% for 2011, down from a previous estimate of 2%.

This is in broadly in line with the Office for Budget Responsibility (OBR) which this week lowered its 2011 economic growth forecast to 1.7% from its previous estimate of 2.1%.

In his Budget earlier this week, Chancellor George Osborne pledged to boost growth but will not compromise the plans to bring the current budget deficit down.

The tough austerity measures introduced by the Government have been supported by many, while others have said they risk pushing the UK Britain back into recession.

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News posted: March 25, 2011

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