Us Economy, Credit Ratings

Us Economy, Credit Ratings

Fitch downgrades US outlook to negative from stable

Fitch downgrades #US outlook to negative from stable

1/8/2020 2:13:00 AM

Fitch downgrades US outlook to negative from stable

[WASHINGTON] Ratings agency Fitch on Friday downgraded the outlook for the United States to negative from stable, warning of high debt and deficits made worse by the coronavirus downturn. Read more at The Business Times.

Tell us what you think. Email us agency affirmed the US's AAA rating but said it expected government debt to hit 130 per cent of GDP by 2021.The bill may stabilise from 2023, but only if interest rates remain low, and"it is uncertain whether very low market rates will persist once growth and inflation pick up," and rising health care and social security costs could also threaten the stability, Fitch said.

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Lawmakers in Washington passed the US$2.2 trillion CARES Act in March to blunt the pandemic's blow and are working on another massive spending bill.Fitch predicted the deficit will hit 20 per cent of GDP this year before scaling back to 11 per cent of GDP in 2021 as the spending measures conclude.

"It is a truism that the US government cannot run out of money to service its debts," Fitch said."However, there is a potential (albeit remote) risk of fiscal dominance if debt-to-GDP spirals, posing risks to US economic dynamism and reserve currency status."

Adding to the uncertainty is the divided state of politics in Washington ahead of elections in November in which President Donald Trump is standing for a second term.Fitch warned of the consequences if Congress and the White House can't agree in coming years on a path to stabilising the US's finances.

"Political polarisation may weaken institutions and reduces the scope for bipartisan cooperation, hindering attempts to address structural issues... but also longer-term fiscal challenges," the agency said.AFPBT is now on Telegram! Read more: The Business Times »

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