[Asia Economy Reporter Hwang Yoon-joo] The international credit rating agency Fitch has downgraded the United Kingdom's sovereign credit rating by one notch.
According to Reuters on the 28th (local time), Fitch lowered the UK's sovereign credit rating from 'AA' to 'AA-'. The 'AA-' rating is the same as that of Korea, Belgium, and the Czech Republic.
In particular, Fitch maintained a 'negative' outlook, suggesting that the UK's sovereign credit rating could be further downgraded.
The reason for the downgrade is the ongoing uncertainty in future relationship negotiations with the European Union (EU), as well as concerns that public debt will significantly increase due to policy responses to the novel coronavirus disease (COVID-19).
Fitch stated, "This downgrade reflects not only the weakening of the UK's fiscal position caused by the impact of COVID-19 but also the clearly evident fiscal easing trend that existed prior to this."
Fitch projected that while measures to mitigate the economic shock caused by COVID-19 are necessary, the UK's public debt is expected to rise from 84.5% of GDP last year to 94% this year and 98% next year.
In the medium term, considering gradual fiscal deficit reduction and an economic growth rate of around 1.6%, the public debt size is expected to exceed 100% of GDP after 2025.
Fitch forecasted that the UK's GDP will shrink by 4% this year due to store closures and other measures related to COVID-19. However, with the easing of such lockdown measures in the second half of the year, growth is expected to recover to 3% next year.
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