UK's government debt burden may reach 100% of GDP

Posted May 21st 2009 3:00PM by Connie Madon
Filed under: International Markets, Market Matters, Economic Data, Recession

Can you imagine this! The outlook in the UK has been downgraded by Standard & Poor's to negative from stable. To underscore the dire economic circumstances in the UK, Standard & Poor's David Beers said: "We have revised the outlook on the UK to negative due to our view that even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term." Yet the Agency did maintain the UK's long term sovereign credit rating at AAA.

The report triggered a drop of 1.2% in the pound to $1.5529 to the dollar and 1.4% against the euro to .8866 pounds.

Tax revenues are dropping and public expenditures are soaring, which means that the government will need to raise more capital. Borrowing will reach 175 billion pounds for the fiscal year 2009-2010, forcing a sale of gilts (UK bonds) in the amount of 220 billion pounds.

Howard Archer, an economist at IHS Global Insight said: "The public finances for April were dire, starting the new fiscal year off as it is highly likely to continue."

Why should we watch what is going on in the UK? First off, any country where its government debt burden could approach 100% of GDP bears notice. Secondly, we could get some insights about the current situation in the US

Let's keep an eye on this one.

Tags: inthenews, S P, S P downgrade, SP, SPDowngrade, UK outlook

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Reader Comments (Page 1 of 1)

5-21-2009 @ 9:08PM

ij70 said...

Looks like Nanny State is going down. Will be interesting to see if Brits will step back from Socialism.

5-22-2009 @ 12:06PM

tom_c_read said...

Don't worry Britain! Us politicians have got your best interests at heart! We're not just in it for the money, honest! You can trust us.

Regards

Cllr Brody (Jack), Rochdale, UK