UK economic outlook shifts from stable to negative (Moody’s)

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As Britain’s political crisis deepens, New York-based credit rating firm Moody’s Investors Service has downgraded the country’s economic outlook from “stable” to negative.

Citing the lack of political stability in the UK as one of the fundamental reasons for the downgrade, Moody’s published outlook on Friday.

The agency said heightened unpredictability in policy-making, inflation hitting new highs and growth prospects looking bleak, added to the overall decision.

“Risks to UK debt affordability due to likely increase in borrowing and risk of lasting weakening of policy credibility,” he cited as another reason for the review. downside prospects.

The agency said the reversal will only be possible if the UK government is able to inspire confidence with its policy measures.

“The evolution of policymaking and the UK government’s ability to instill confidence in its commitment to fiscal prudence will be an important consideration for Moody’s in addressing the negative outlook.”

Read more: Moody’s downgrades Pakistan’s economic outlook to negative, gives it ‘C rating’ after seven years

Notably, a forecast period lasts from 12 to 18 months. However, given the situation the UK currently finds itself in, that may not change for a long time.

As WION reports, following the rather moderate sacking of Liz Truss as Prime Minister, the Tories have dug themselves another hole.

WATCH | UK economy shrinks 0.3% in August

Truss is the fourth UK Prime Minister to step down since the 2016 Brexit vote and if a strong face is not brought to 10 Downing Street soon, the country could be heading for a premature general election and a deep financial crisis.

Britain’s inflation hit a 40-year high in September, topping double digits on soaring food prices, official data showed on Wednesday.

September’s rate matched July’s level and is the highest in 40 years also due to exorbitant energy bills.

Read more: UK inflation accelerates to 40-year high amid rising food prices

“I understand that families across the country are struggling with rising prices and higher energy bills,” said Britain’s new finance minister, Jeremy Hunt.

The situation on the continent and particularly in the UK has been exacerbated by the Russian-Ukrainian war which has been going on for eight months. Moscow shut down the supply of natural gas through its Nord Stream gas pipeline and the immediate effect was rising fuel prices.

With the winter season fast approaching and utility bills soaring, inflation has increased significantly. Most countries in Europe do not have energy reserves that can last the whole season.

Read more: EU average inflation hits 10.9% in September

Several reports have suggested that energy bills in the UK could soar by $6,000 to $7,000, leaving a significant portion of the population in dire straits.

The downgrading of ratings means that the British government will have to borrow at high interest rates on the international market, which further lengthens the recovery process.

(With agency contributions)

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