Moody’s, one of the biggest ratings agencies in the world, has warned the UK government on the high scores that the country’s government has garnered on economic governance because these may make them feel very confident amidst the approaching “formidable and rising challenges”.
Moody’s has pointed out that the UK showed “significant structural strengths” and still can hold on to their top AAA rating. However, the UK has a big weakness at hand which is their partnership with the eurozone. This can stunt their growth as a country may place a loophole in the government’s plans of lessening their debt.
According to the official statement by Moody’s, “A need to support the banking system could temporarily set back the government’s fiscal consolidation efforts. As a result, the outlook on the rating is likely to be sensitive to future developments in the euro area’s debt crisis, even though the UK is not a member of the monetary union.”
Moody’s has stressed that the UK is just “partially cushioned from the crisis”.
However, the UK is commended for its strength as well as its competitiveness against the other large and more advanced economies in the globe. Moody’s has emphasized the UK’s “track record of reversing increases in debt over many decades”.
The country also benefited from the organization of the Office for Budget Responsibility in putting the country’s economy in focus for the last several months.
The opinions that are provided by ratings agencies such as Moody’s, Fitch, and Standard & Poor’s, greatly affect the cost of borrowing of any country.
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