Fitch cuts UK credit outlook over unfunded fiscal package-Xinhua

Fitch cuts UK credit outlook over unfunded fiscal package

Source: Xinhua| 2022-10-06 20:10:15|Editor: huaxia

LONDON, Oct. 6 (Xinhua) -- Rating agency Fitch has lowered the outlook for its credit rating for the United Kingdom (UK) government debt from "stable" to "negative", citing risks from the country's "large and unfunded fiscal package."

The fiscal package announced in September as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term, Fitch said on Wednesday.

It estimated that without compensatory measures, the general government deficit will remain elevated at 7.8 percent of gross domestic product (GDP) in 2022 and increase to 8.8 percent in 2023, due to the impact of high inflation on index-linked government debt, previously announced household support, the energy price cap and tax cuts.

The change in fiscal trajectory will push general government debt to 109 percent of GDP by 2024 from an estimated 101 percent in 2022, reflecting both higher primary deficits and a weaker growth outlook, the agency said.

The fiscal stimulus, without an independent evaluation of the macroeconomic and public finances' impact, and the inconsistency between fiscal and monetary policy stance, "have negatively impacted financial markets' confidence and the credibility of the policy framework, a key long-standing rating strength," it noted.

The UK government on Sept. 23 unveiled an ambitious plan to cut taxes and boost economic growth, which has raised huge concerns about the country's fiscal health.

Following that, rating agency S&P has cut the outlook for its credit rating for the UK sovereign debt to "negative" from "stable."

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