Tags: POLITICS andGOVERNMENT | UK | FITCH | ECONOMY | INVESTMENT STRATEGY

Fitch Warns UK Facing 'Formidable' Challenge

Tuesday, 08 Jun 2010 07:32 AM

Fitch Ratings agency warned Tuesday that Britain faces a "formidable" fiscal challenge and must cut its budget deficit faster to maintain its top credit rating.

In a special report ahead of an emergency budget planned by the new coalition government, Fitch noted that the rise in public debt ratios since 2008 is faster than any other AAA-rated country.

It added that the primary deficit is almost twice as large as during previous economic downturns in the 1970s and early 1990s.

Britain's budget deficit is forecast to reach 10.4 percent of gross domestic product this year, while debt as a percentage of GDP was 62 percent in 2009-2010.

"The scale of the United Kingdom's fiscal challenge is formidable and warrants a strong medium term consolidation strategy," the report said.

Prime Minister David Cameron has pledged drastic spending cuts,
warning that the nation cannot avoid cutting a deficit which rose to 156 billion pounds ($225 billion) in the last fiscal year.

Fitch noted that the new coalition government had acted "very quickly" to make fiscal consolidation its top priority and has announced immediate tightening measures of 0.4 percent of GDP in the form of 6 billion pounds of spending cuts.

It stressed that Cameron's budget on June 22 must set out a more ambitious program than the targets set out in the previous government's April budget to reduce the deficit to 8.5 percent of GDP in 2011/12 and to 5.2 percent in 2013/2014.

Former Prime Minister Gordon Brown had repeatedly warned that bigger spending cuts this year could jeopardize Britain's fledgling recovery from its worst recession since World War II.

"Both the size of the deficit currently projected for 2011 and the failure to reduce the deficit to 3 percent of GDP within five years are striking," Fitch said in its report.

"A more ambitious deficit-reduction path — with borrowing 1 percent lower than in budget 2010 through the medium term — would result in an earlier peak in the debt/GDP ratio and a clearly declining debt path within the medium-term horizon, helping to go some way to restoring fiscal space, or a cushion against further shocks," it added.

© 2017 Thomson/Reuters. All rights reserved.

   
1Like our page
2Share
Economy
Fitch Ratings agency warned Tuesday that Britain faces a formidable fiscal challenge and must cut its budget deficit faster to maintain its top credit rating. In a special report ahead of an emergency budget planned by the new coalition government, Fitch noted that the...
POLITICS andGOVERNMENT,UK,FITCH,ECONOMY,INVESTMENT STRATEGY
355
2010-32-08
Tuesday, 08 Jun 2010 07:32 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved