The S&P has downgraded the outlook on the U.K. economy
Written by A Forex View From Afar on Thursday, May 21, 2009The U.K. financial markets came under a lot of stress this morning, after the S&P announced that it downgraded the U.K. economic outlook to negative from stable.
According to the S&P’s statement, the downgrade follows the poor state of the U.K.’s public finances. The government’s deficit is forecast to reach 100% of the GDP in the following year. To make matters worse, this year’s deficit will reach 175 billion pounds, nearly 12% of the economy. However, most analysts say that the actual number might be even bigger as the government tries to fight the aftermath of the credit crisis.
For now, the U.K. economy still retains its top-notch triple-A rating, but the S&P warns that the U.K’ high level of debt is incompatible with the current rating.
In recent weeks the rating agencies have started to act preemptively, something that has not happened over the last few years. Earlier this week Japan’s foreign-currency debt was downgraded by Moody’s, while the same rating agency put most of the Asia’s financial system on review for a possible downgrade. Furthermore, Moody’s is also preparing to downgrade 34 Spanish banks, including Santander, one of the largest banks in the world.
Most likely, more countries will see their debt rating downgraded in the coming period, as public deficits are set to increase substantially.
| Posted in »
0 comments: Responses to “ The S&P has downgraded the outlook on the U.K. economy ”