Fitch says last week’s Budget had no impact on the safety of the UK’s AAA credit rating.
Earlier this month, Fitch cut the UK’s rating outlook from stable to negative, warning that the UK economy would struggle to absorb unexpected shocks.
It says the “fiscally neutral” Budget contained no unfunded tax cuts or spending promises, conformed to the Government’s commitment to deficit reduction and was bolstered by a slight improvement in growth projections from the Office for Budget Responsibility.
The OBR now predicts gross Government debt will peak at 92.7 per cent of GDP in 2014/15, compared with its November estimate of 93.9 per cent.
Fitch says it expects gross debt to peak at more than 90 per cent of GDP in 2014/15 before gradually declining. It says: “The Budget does not impact Fitch’s assessment that the UK’s AAA sovereign rating is warranted but is vulnerable to adverse shocks. However, the scale of the fiscal challenge remains large relative to its AAA peers. Retaining AAA status is conditional on debt stabilising by the middle of the decade and declining in the foreseeable future to below 90 per cent.”