Moody’s lowered the sovereign rating of Britain from «Aa1» to «Aa2»

© AP Photo / Matt DunhamВид the houses of Parliament in London. Archival photoMoody’s lowered the sovereign rating of Britain from «Aa1» to «Aa2»© AP Photo / Matt Dunham

International rating Agency Moody»s lowered the sovereign ratings of the United Kingdom (long-term Issuer rating and the rating of unsecured debt) by one notch to «Aa2» from «Aa1» because of the possible negative impact of the country’s withdrawal from the EU (Brexit) on the national economy. The message of its decision, the Agency published on Friday evening.

Among the main reasons that led to the downgrade, the Agency notes the weakening of the Outlook for public finances in the UK since November last year, when the Outlook on sovereign rating was changed to negative. Also questioned the plans of the British government on fiscal consolidation and the probability that the country’s debt burden will continue to grow.

According to analysts of the Agency, the pressure on the fiscal system of Britain will increase due to the decrease in the strength of the British economy in the medium term because of Brexit.

After the decline of the sovereign ratings Moody’s also downgraded the Bank of England and the unsecured bonds to «Aa2» from «Aa1». The Outlook on these ratings accordingly upgraded to «stable» from «negative».

Agency experts believe that the national debt of Britain in 2017 will almost reach 90% of GDP, and in 2019 it will be close to 93% of GDP. In 2016 this figure was 82.6%.

The budget deficit in the coming years will be 3-3,5% of GDP. While the British government intends to reduce this figure to less than 1% of GDP in financial year 2021-2022.

The UK GDP growth in 2017 will slow to 1.5% in 2018 – up to 1%, according to the Agency.

Moody’s became the first Agency, which downgraded the ratings of Britain in June 2016 immediately after the referendum on Brexit. Then the forecast was lowered from «stable» to «negative» by rating long-term Issuer and debt rating. However, both ratings were confirmed at «Aa1».