S&P Global, the New York-headquartered American credit rating agency, often contemplated as one of top three credit rating agencies across the globe alongside Fitch and Moody’s, has slashed Britain sovereign debt rating outlook to negative from stable, while S&P also had forecasted that the UK economy would enter into a technical recession as early as by the current quarter.
On top of that, S&P also added that the UK economy would contract by 0.5 per cent next year sounding an alarming tone over the newly elected PM Liz Truss’ fiscal policy.
S&P trims UK credit outlook
As S&P slashed UK credit outlook to AA- (AA negative) from stable, the global credit rating agency said in a statement, “For now it is unclear whether the government plans to ultimately introduce fiscal consolidation measures to bring debt back on a downward path and we assume that the package will be funded by debt”.
As S&P cited UK’s monetary policy to cut taxes as a primary reason behind its latest decision to downsize UK’s credit rating outlook, sterling has been hanging on a tight rope. Nonetheless, the UK Central Bank had fostered a measure to purchase as many as $65 billion worth of Government bond repurchase program in order to stabilize the British Pound.
Still, amid a swathe of negative fundamentals alongside threats of a technical recession as early as by the current quarter, Bank of America had told earlier this week that the British Pound will hit a parity with Dollar before year-end.
Aside from slashing UK’s credit rating, S&P also forecasted that UK’s public debt would likely to average at 5.5 per cent of its GDP between 2023 and 2025, up from a previous projection of 3 per cent. Besides, Government debts could rise to as high as 97 per cent of the Kingdom’s entire GDP (Gross Domestic Product), S&P forecasted.