A Reuters file photo.
Fitch downgraded the country by one notch to ‘AA-’ - the same level as its rating for Belgium and the Czech Republic - from ‘AA’ and said a further cut could follow as it kept the rating on negative outlook. “The downgrade reflects a significant weakening of the UK’s public finances caused by the impact of the COVID-19 outbreak and a fiscal loosening stance that was instigated before the scale of the crisis became apparent,” Fitch said.
“The downgrade also reflects the deep near-term damage to the UK economy caused by the coronavirus outbreak and the lingering uncertainty regarding the post-Brexit UK-EU trade relationship.” Facing what some economists say could be Britain’s deepest recession in a century after the government ordered many businesses to close to slow the spread of coronavirus, Finance Minister Rishi Sunak has announced a string of stimulus measures to try to prevent a surge in unemployment.
“We have taken unprecedented action to support people, businesses and our vital public services through this crisis. These are the right steps to protect our economy against lasting damage,” a spokesman for the Treasury said on Saturday in response to the Fitch rating cut.
“Our public finances are sound after 10-years of bringing debt and borrowing under control. These measures are temporary and will lead to a short-term increase in borrowing.” Central to Sunak’s plan is a commitment for the state to pay 80% of the wages of workers who are temporarily laid off.
The Bank of England, like other central banks around the world, has also jumped into action, expanding its bond-buying programme by a record 200 billion pounds and cutting its main interest rate to a record low 0.1%.
Published in The Express Tribune, March 29th, 2020.
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