The UK faces historic dual coronavirus, Brexit challenges, although counterbalancing economic strengths remain.

The United Kingdom is still able to avoid having no deal, Brexit - again, by the end of 2020. But with coronavirus-related spending is likely to push the budget deficit to over 10% of GDP. This year, public debt to GDP will exceed 100% and is likely to increase higher in the medium term.

The range of ratings indicates the heavy impact of Covid-19 and Brexit is testing the resilience of the UK's economy and public finance, despite the United Kingdom (AA / Negative rating according to Pham. vi) retain important and strong financial strengths.

Dennis Shen, the government leader of Vladimir Johnson faces analyst for the UK.

The United Kingdom has experienced a severe damage from the pandemic due in part to the mismanagement of the government during the crisis, accounting for nearly 10% of the deaths confirmed by Covid-19 globally. (according to data from Johns Hopkins University) with 0.9% of the world population. Shen said the economy and the trade-offs in this crisis are not clear tradeoffs in the final analysis - as long as the virus is unregulated, there is no real normalization of economic conditions, Mr. Shen said.

Brexit represents a second potential risk
The United Kingdom faces a second potential crisis: the late June deadline looms in the Brexit process as to whether to extend the deadlock period in the EU single market and the maritime union. After 2020 - a deadline that UK negotiators will likely miss.

If so, the UK will technically lose options under the 2019 Withdrawal Agreement to avoid a no-deal exit on January 1, 2021, Mr. Shen said. However, even if the deadline is omitted, we expect an agreement by the end of 2020 to expand the transition state and avoid hard Brexit. Such an extension means that the United Kingdom continues to pay the EU budget for the EU fiscal period 2021-27.

Shen Under Brexit's beautiful words and posture, we believe that there is very little real appetite from the general public for an unconventional exit on either side of the Channel amid an economic and physical crisis. is in serious health, Mr. Shen said. UK proposals for a temporary touch-up customs regime, in the absence of any trade agreement being implemented, are also unrealistic - as stated by the EU.

Deep recession with financial recession

The UK economy is expected to deepen into recession by 2020. Currently, a significant weakening of the UK's public finance is expected with a budget deficit rising to over 10% of GDP by year. 2020 with public debt rising to over 100% of GDP from 85% in 2019, Shen said Shen. Brexit contingency contingency plans by the end of 2020 are expected to add additional budget costs - as they did in 2019. The economic instability associated with Brexit will cause investment losses. and hinder recovery after 2020 as well as in the years to come.

Public debt is likely to continue to increase, on average, to 115% by 2024, as the UK economy recovers with the support of monetary and monetary policies but the deficit is still high when the Government of Bao The prime minister sought to avoid a new round of austerity cuts, in line with a looser global financial consolidation response after this crisis than after 2008-09. This also links to a weakening financial framework of the UK after weakening from the Brexit process.

The government can achieve financial support for households in public opinion polls, it will want to provide financial support to households and businesses - potentially a significant tax increase and Reduce spending in the near future, he said. The government discussed handling accumulated debt by 2020 as war debt, proving a higher rate of public debt. Central bank QE has granted the government greater financial space. Unfortunately, however, the debts accumulated during this crisis, however, will have to be paid one day, Mr. Shen said.

However, the UK maintains its economic and fiscal strength
However, the UK has strong financial and financial strengths. One of the three economies with the Big Bank's four central banks along with independent monetary policy - the other two are the United States and Japan - the United Kingdom can issue sows and increase borrowing with immediate concern about debt sustainability. UK yields are near historic lows: at or below 0% on average to short and only 0.2% to borrow for 10 years (compared to nearly 5% at crisis height in 2008). Similarly, UK interest payments were at their lowest since World War II, with debt interest rates on sales of about 3.5%, according to new fiscal rules set in case this ratio goes up. over 6%.

The public debt ratio in 2020 is still lower than that of sovereign states that are ranked similar to France (AA / Stable) (about 115% of GDP by the end of 2020) and the United States (AA / Stable) ( 135-140%) despite an increase in the UK government debt stock. The government's annual gross financial needs are also significantly lower than such sovereign nations, with the UK's average maturity of 15.2 years, which is equivalent to 7.8 years. in the case of France, 5.8 years for the US and an average of 7 years for the G7 Countries.

Moreover, the Bank of England bought sows in the secondary market, Mr. Shen said. With the QE expansion to GBP 645 billion as announced in March, the central bank should have access to at least 30% of UK debt securities by 2020, up from 24% at the end of 2019, with significant QE will be expanded further. . Even if the purchases represent only the temporary transfer of British debt to the central bank, this will help alleviate the 2020 increase in UK government debt to the private sector - the segment. Sovereign debt is assessed by Scope.

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