Ratings agencies say PM Johnson’s exit adds to strain on UK economy

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The tumultuous resignation of British Prime Minister Boris Johnson this week will add to growing pressures on Britain’s economy, the world’s leading credit rating firms S&P Global and Moody’s have said.

Moody’s vice-chairman Evan Wohlman said a potentially lengthy leadership race in the UK’s ruling Conservative Party would now slow efforts to tackle rising cost-of-living pressures and problems of stagflation.

“We expect the next government to face a persistently high public debt burden given political pressure for looser fiscal policy,” Wohlman said.

Moody’s currently has a ‘stable’ outlook on its Aa3 rating in the UK, as does S&P, although its rating is one notch higher than AA.

S&P said Britain’s next prime minister would face a number of challenges, particularly with a technical recession now forecast for the second half of this year and near-single-digit inflation eating away at people’s finances.

The UK’s independent tax body, the Office for Budget Responsibility, has forecast that real disposable income will fall by 2.2% this financial year (2022/2023), the biggest annual fall since the start of the recordings.

General public debt was expected to fall to 94% of GDP by 2025, from 96% at the end of 2021, although current pressures are now raising doubts about this prospect.

“(UK) ratings could come under pressure if economic growth is significantly weaker than expected, putting fiscal consolidation in jeopardy,” S&P said. (Reporting by Marc Jones, editing by Louise Heavens)

Reuters

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