'Significant Credit Strengths' Not Enough to Save UK's Pristine Rating
Moody’s Investors Service caught a lot of attention going into the weekend by downgrading the United Kingdom’s domestic and foreign-currency government bond ratings by one notch. However, what’s been covered significantly less in the mainstream media headlines is the ratings agency’s bright outlook on the UK’s stability going forward.
Moody’s noted it lowered the credit rating because of continued growth outlooks in the medium term in part because of its own austerity measures along with spillover from problems with its debt-hobbled European Union counterparts. While it predicted the slower growth will stretch into the second half the decade, Moody’s got significantly less attention for keeping the UK in a “stable” category and, within parts of its statement explaining the downgrade yet a stable outlook, seemingly gushing about the sovereignty:
“The UK's creditworthiness remains extremely high, rated at Aa1, because of the country's significant credit strengths. These include a highly competitive, well-diversified economy; a strong track record of fiscal consolidation and a robust institutional structure; and a favourable debt structure, with supportive domestic demand for government debt… the underlying economic strength and fiscal policy commitment which Moody's expects will ultimately allow the UK government to reverse the debt trajectory.”
-Brian Shappell, CBA, NACM staff writer