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Moody’s downgraded the UK debt due to the economic impact of the coronavirus crisis, but also due to Brexit and the lack of clear budget plans from the Boris Johnson government. Moody’s downgraded the rating from “Aa3” to “Aa2”, putting the UK on par with Belgium and the Czech Republic, writes Mediafax.
Moody’s argued that the advancement of the UK economy was “significantly weaker than expected and is likely to remain so in the future.”
The world’s sixth-largest economy saw the biggest drop in the G7 in the second quarter, and its public debt topped 2,000 trillion pounds ($ 2.6 trillion), exceeding 100% of gross domestic product, it shows. Reuters.
The downgrade is a blow to Prime Minister Boris Johnson, who is being attacked by opposition parties and criticized by Conservative MPs for dealing with the pandemic. The coronavirus has killed more people in the UK than anywhere else in Europe. The UK ranks fifth in the world with over 43,500 deaths.
Moody’s also says that the UK’s failure to reach a trade deal with the EU will compound the damage caused by COVID-19. Johnson suggested Friday that there was no point in continuing the trade talks.
Moody’s also believes that the UK has lost its budgetary discipline and that high debt will not come down anytime soon. “The UK doesn’t really have an anchor for fiscal policy,” the agency said.
Moody’s has revised the outlook for the country’s sovereign debt from “stable” to “negative.” The downgrade places Moody’s rating at the same level as Fitch’s, while Standard & Poor’s rates the country with a higher rating.
Editor: Luana Pavaluca
