Sun, Sep 21, 2014 page13

• Moody’s confirms Britain’s stable ‘Aa1’ credit rating

  • AFP, WASHINGTON
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  Ratings agency Moody’s confirmed Britain’s credit rating at “Aa1” on Friday, saying that Scotland’s rejection of independence has preserved the strengths of the country’s institutions and financial system.

  “Moody’s decision to affirm the UK’s rating follows the outcome of the referendum on Scottish independence, which maintains the 307-year-old union, thereby preserving the country’s current institutional and fiscal framework,” the company said.

  Yet Moody’s noted that a “Yes” vote for independence on Thursday would not have significantly changed Britain’s credit profile.

  

  British Prime Minister David Cameron speaks to the press about his “delight” in the outcome of the Scottish national referendum outside 10 Downing Street in London, England, on Friday.

  Photo: EPA

  According to the ratings firm, the promises made by the government of British Prime Minister David Cameron to confer more powers to the four nations that make up the UK will not affect the outlook of one of the world’s most credit-worthy countries.

  “While the political process going forward will likely lead to further devolution of powers to Scotland and some changes in the fiscal transfers, the rating agency does not anticipate that these will have a material impact on the quality of the UK’s institutions, or its financial strength,” it said.

  Moody’s said it was keeping Britain’s outlook stable, suggesting that it did not expect to change the rating in the coming months.

  The British economy grew by 0.8 percent in the second quarter from the first quarter, and expanded by 3.2 percent year-over-year.

  Moody’s also on Friday maintained its negative rating on France, but — despite earlier reports — did not deal the struggling economy a downgrade.

  Moody’s kept its “Aa1” overall rating for the country’s debt, but warned of significant risks in the government’s efforts at restructuring to deal with its heavy fiscal challenges.

  Moody said France’s still manageable debt burden justified keeping the rating where it is, even as the country struggles.

  “Despite negative credit pressures, the country retains significant credit strengths, including the size and wealth of the economy, as well as its affordable debt burden despite a continuous, gradual erosion of its economic and fiscal strength,” Moody’s said.

  It also pointed to the government of French President Francois Hollande’s commitment to undertake strong reforms to cut the fiscal deficit and improve growth prospects for the longer term.

  On the other hand, Moody’s warned that Paris faces formidable hurdles, “given the strength of vested political interests that might oppose them and the poor track record in implementing such reforms.”

  Meanwhile, Fitch Ratings on Friday said that the US still deserves its highest credit rating, affirming its “AAA” rating on US debt.

  The ratings agency said its outlook on the rating is stable, meaning it does not expect a downgrade in the near future.

  Fitch said the US can tolerate more debt than other countries because the dollar is the world’s pre-eminent reserve currency and fixed-income asset.

  It also noted that the country has the deepest and most liquid capital markets in the world.

  The federal deficit should decline as a portion of GDP over the next few years, though it should resume growing in fiscal 2016, Fitch said.

  Additional reporting by AP
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