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BUDGET 2010: Fitch warns of continued UK economy fears

Fitch Ratings says the UK economy is still vulnerable to any economic shocks regardless of the measures outlined in today’s Budget.

Chancellor Alistair Darling outlined plans to cut the UK deficit in half over the next four years from 11.8 per cent of GDP to 5.2 per cent in 2015.

But Fitch says the Budget does not “materially change” its view of the health of the UK economy. Global head of sovereign ratings David Riely says: “The projected path of deficit reduction still renders the public finances vulnerable to shocks given the uncertainty over the UK’s medium-term economic prospects.”

While it says the lower than expected outturn for borrowing in 2010 is welcome, it says new measures to support the economy appear to be funded by spending cuts elsewhere or from bonus tax receipts.

Fitch head of EMEA sovereign ratings Brian Coulton says: “While this inches in the right direction in terms of strengthening the medium term fiscal consolidation path, the deficit reduction path from 2011 is still slow.

“Public debt to GDP does not peak until 2014 and does not fall materially until after 2015. This projected path leaves the public finances vulnerable to shocks, particularly in the presence of large uncertainties over the UK economy’s medium term prospects.”

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