LONDON (dpa-AFX) - Moody's Investor Service has warned that the U.K. faces formidable and rising challenges, largely emanating from its exposure to Europe and weaker near-term macroeconomic outlook.
In its annual update on the economy, published Tuesday, the agency said that the significant increase in the UK government's deficit and debt metrics since 2008, the weaker macroeconomic prospects and the risks emanating from the euro area crisis mean that the UK's stable Aaa rating has a 'reduced ability to absorb further macroeconomic or fiscal shocks without rating implications.'
The economy's near-term macroeconomic outlook has weakened. Any additional weakening in the economic outlook or a need to support the banking system could temporarily set back the government's fiscal consolidation efforts, Moody's pointed out.
'As a result, the outlook on the rating is likely to be sensitive to future developments in the euro area's debt crisis, even though the UK is not a member of the monetary union,' it added.
At the same time, the agency gave the UK government high scores on long-term economic fundamentals, institutional strength, government financial strength and susceptibility to event risk.
Copyright RTT News/dpa-AFX