S&P Global Ratings has upgraded its outlook for the UK to stable from negative. The rating agency affirmed the country’s long-term sovereign credit rating at AA, with the short-term one being at A-1+.
S&P said that the outlook was revised to reflect reduced risks to the UK's public finances compared to September 2022. Last autumn, the agency downgraded the UK's rating to negative because of Liz Truss's unfunded budgetary measures, also known as the mini-budget. The failure of that plan, which was originally intended to support the UK economy, resulted in Liz Truss resigning as Prime Minister.
The current stable outlook reflects Britain's strong economic performance. The country also ran a moderate budget deficit. S&P believes that short-term economic risks to the British economy have declined.
Standard & Poor predicts that the country's GDP will shrink by 0.5% in 2023. According to preliminary forecasts, in 2024 and 2025, UK GDP will grow by 1.5% and 1.8% respectively. An earlier outlook from S&P in September 2022 suggested the British economy would expand by 1.4% in 2024 and by 1.6% in 2025. Analysts predict that UK GDP growth would then slow down to 1.6% in 2026.
Furthermore, inflation in the UK is expected to decrease to 5.8% in 2023 from 9.1% in 2022. Price growth is forecasted to fall to 1.4% and 1.1% in 2024 and 2025 respectively. S&P analysts believe that UK inflation will only begin to rise in 2026 at the earliest, when it could reach 1.7%.
