Fitch slashes British debt outlook to "negative"
2012-03-15 12:54:55
Fitch Ratings on Wednesday revised the outlook of Britain's Long-term Issuer Default Ratings (IDRs) from "stable" to "negative," citing the country's high debt levels and gloomy economic recovery prospects.
Britain has "very limited fiscal space to absorb further adverse economic shocks" against the background of high debt levels and weak economic recovery, it said.
The ratings firm still kept its "AAA" rating on British sovereign debt.
According to Fitch, a negative outlook indicated "a slightly greater than 50-percent chance of a downgrade" in the next two years.
It said such a downgrade could be triggered by either a higher-than-forecasted government debt level, adverse shocks that imply higher government borrowing, or lower expectations on Britain's medium-term growth.
Meanwhile, Fitch recognized the progress the British government had made in reducing its structural budget deficit as well as the credibility of the government's fiscal consolidation efforts.
Britain runs a budget deficit second in size only to the United States. The coalition government has been taking fiscal austerity measures since 2010 and aimed at achieving a cyclically-adjusted current budget surplus by 2016-17.