(Alliance News) - Fitch Ratings on Friday downgraded the UK's sovereign debt rating a notch and lowered the outlook to negative, citing the "significant weakening" of public finances and damage to the economy from the coronavirus pandemic.
"The coronavirus outbreak has inflicted an unprecedented shock on financial markets and economic activity, with policymakers struggling to avert a longer-lasting downturn," Fitch said in a statement.
In addition, lingering uncertainty over Brexit and the "uncertainty around the future trade relationship with the EU could constrain the strength of the post-crisis economic recovery".
Fitch estimated the British economy could contract by 4% this year due to the nationwide shutdowns implemented to halt the spread of the virus, followed by a sharp recovery in 2021.
However, that forecast is subject to "material downside risk" and depends on the duration of the lockdowns.
Even before the virus hit, the UK's finances were already set to weaken and "they are now set to deteriorate more rapidly," Fitch said.
The outlook for the country's debt rating was dropped due to the view that the British government will not see it as "a political priority" to tighten up its finances after this year.
source: AFP
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