Britain's economic growth remains unbalanced: Moody's

Credit rating agency Moody's Investors forecast Monday that British real gross domestic product would rise 2.7 percent and 2.4 percent in 2015 and 2016 respectively, but the country's growth pattern remains "relatively unbalanced."

Britain's economic growth prospects remain solid over the next 12 to 18 months, but this is mainly driven by domestic demand and the services sector, while exports and manufacturing remain subdued, said Kathrin Muehlbronner, a senior credit officer at Moody's, in its annual credit analysis report.

The agency views Britain's strong commitment to reducing the budget deficit as "credit positive", and the expected pace of fiscal consolidation is thought to be sufficient to engineer a gradual reduction in the public debt ratio from 2017 onwards. But it reckons that the spending cuts targeted by the government might be difficult to achieve in full.

Last week, the British Treasury announced that the government needed to find a further 30 billion pounds (or 46 billion U.S. dollars) of savings over the next three years, including 12 billion pounds to come out of welfare spending and 13 billion pounds from cuts to government departments.

Moody's warned that Britain's high public debt level, of which the debt burden stands at around 90 percent of GDP and is still rising, remains a "key credit weakness."

"If the referendum on the UK's membership in the EU resulted in a withdrawal, and the government was not able to negotiate a reasonably strong alternative trade arrangement, the UK's sovereign rating would likely come under pressure," said Muehlbronner. Endit