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Moody’s warns slow growth may place UK’s AAA status at risk

The UK’s AAA sovereign debt rating could be downgraded if growth slows to the point that it impacts the Government’s fiscal consolidation, according to ratings agency Moody’s.

During his Budget statement on Wednesday Chancellor George Osborne announced that the Office for Budget Responsibility had revised its growth figures for 2011/12 from 2.1 per cent to 1.7 per cent and from 2.6 per cent to 2.5 per cent for 2012/13.

In a statement Moody’s said: “Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK’s sovereign rating level, we believe slower growth combined with weaker than expected fiscal consolidation could cause the UK’s debt metrics to deteriorate to a point inconsistent with an AAA rating.”

Moody’s downgraded its own forecast for UK growth further than the OBR to 1.6 per cent but the OBR’s forecasts beyond 2012/13 remain at much the same point they were at last November’s economic and fiscal outlook.


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