Moody’s on Friday reaffirmed the UK’s rating at AA3, but changed the outlook from stable to negative. In a statement, the rating agency says the first driver of change is “increased unpredictability in policymaking amid a volatile domestic political landscape that challenges the country’s ability to manage shocks stemming from strong growth prospects.” Weak and High Inflation”.
“Moody’s view of the September 23 tax report, with several announced measures and the impending change of prime minister, is a continuing reflection of the weak predictability of fiscal policymaking seen in previous years,” it said in a statement. Friday.
The second factor is “additional risks to UK borrowing capacity due to the risk of over-borrowing and high sustained inflation. A continued erosion of UK political credibility will lead to higher borrowing costs in the medium term.”
According to the agency, evolving policy-making and the UK government’s ability to build confidence in its commitment to fiscal prudence will be an important consideration in reversing Moody’s negative outlook.
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On the other hand, Moody’s notes that the confirmation of the AA3 rating “supports the UK’s economic resilience by its rich, competitive and diversified economy”.
“Despite weakening fiscal policy predictability in recent years, the country’s long-term institutional framework remains strong and will continue to support the UK’s ability to respond to shocks seen during the pandemic. In addition, the UK government’s debt structure, with a very long average maturity of around 15 years, as well as a deep domestic investor base, buffers shocks. Adds a degree of resilience to the credit profile as faced.
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