UK loses Moody’s top credit rating as debt outlook turns negative
London, United Kingdom (4E) – The UK was stripped of its top Aaa credit rating for the first time in 35 years as the outlook for the economic growth in the country will stay sluggish over the next several years.
In a statement released by Moody’s, the UK’s credit rating was downgraded by one level from Aaa to Aa1 as the stable outlook for the nation’s debt fell to negative. It also added that it is unlikely that the deterioration in the government’s balance sheet will be reversed before 2016 due to high and rapidly rising debt burden.
Chancellor of Exchequer George Osborne said that the downgrade is a clear reminder of the extent of the debt problems the UK is currently facing.
The action will also likely to increase political pressure from the opposition Labour Party against Osborne’s fiscal austerity with the economic recovery struggles to gain momentum.
The country’s gross domestic product (GDP) contracted by 0.3 percent in the final three months of 2012 from the previous quarter, placing the economy on the verge of a triple-dip recession.
The UK has maintained a Aaa credit rating from both Moody’s and Standard & Poor’s since 1978.
Moody’s, however, said that it does not see any further downgrades in the near future, while adding that the creditworthiness of the UK stays extremely high.