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Fitch strips Britain of top triple-A rating

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(Globalpost/GlobalPost)

Fitch on Friday stripped Britain of its top triple-A rating, moving it down one notch to 'AA+' as a weaker economic outlook continues to push up the country's debt.

"The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt," said the ratings agency. It gave Britain a 'stable' outlook.

"Despite the loss of its 'AAA' status, the UK's extremely strong credit profile is reflected in its 'AA+' rating and the Stable Outlook," Fitch added.

The downgrade comes almost two months after rival agency Moody's also stripped Britain of a triple-A debt rating, saying government debt was still mounting and that growth was too weak to reverse the trend before 2016. Downgrades can cause a country to pay higher interest for its debt.

Friday's development comes ahead of official economic data out next week that will show whether Britain fell into recession during the first quarter of 2013.

Fitch said it was revising down its forecast economic growth for Britain in 2013 and 2014 to 0.8 percent and 1.8 percent respectively, from 1.5 percent and 2.0 percent six months ago.

"The UK economy is not expected to reach its 2007 level of real GDP until 2014, underscoring the weakness of the economic recovery," it said.

Fitch added: "Higher than previously projected budget deficits and debt primarily reflects the weak growth performance of the UK economy in recent years, partly due to headwinds of private and public sector deleveraging and the eurozone crisis."

Recent official data revealed that British gross domestic product (GDP) shrank 0.3 percent in the fourth quarter of 2012 compared with the previous three months.

Another contraction in the first quarter of 2013 would place Britain in its third recession in under four years. GDP data for this period is due for publication on Thursday.

Britain's economy has been hit hard by the eurozone debt crisis. Though not a member of the eurozone, the country counts the single currency bloc as its main trading partner.

Meanwhile ongoing state austerity measures from the coalition government that took power in 2010 have also hindered Britain's growth.

The country plans to stick firmly to its barrage of cuts, finance minister George Osborne last month insisted in a budget that also slashed the government's economic growth forecasts.

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http://www.globalpost.com/dispatch/news/afp/130419/fitch-strips-britain-top-triple-rating-1