Research Update: United Kingdom Outlook Revised To Stable From Negative On Moderating Fiscal Risks; 'AA/A-1+' Ratings Affirmed

We expect the U.K. economy to contract modestly this year, but we believe near-term downside economic risks have reduced. That said, we forecast medium-term growth will be below historical averages. The government's decision to abandon most of the unfunded budgetary measures proposed in September 2022 has bolstered the fiscal outlook for the U.K. Moreover, the government's energy support scheme has cost significantly less than anticipated because of the fall in energy prices, particularly natural gas. Consequently, we now forecast the general government deficit will average 3.7% of GDP over 2023-2025 compared to the 5.5% we projected in September 2022. We expect net general government debt to begin declining from a high 97.7% of GDP in 2023. We revised our outlook

...- We expect the U.K. economy to contract modestly this year, but we believe near-term downside economic risks have reduced. That said, we forecast medium-term growth will be below historical averages. - The government's decision to abandon most of the unfunded budgetary measures proposed in September 2022 has bolstered the fiscal outlook for the U.K. - Moreover, the government's energy support scheme has cost significantly less than anticipated because of the fall in energy prices, particularly natural gas. - Consequently, we now forecast the general government deficit will average 3.7% of GDP over 2023-2025 compared to the 5.5% we projected in September 2022. We expect net general government debt to begin declining from a high 97.7% of GDP in 2023. - We revised our outlook on the U.K. to stable from negative and affirmed the '##/A-1+' ratings....

Research Update