Wed, Aug 10, 2011 - Page 10 News List

US economy still sound: Moody’s


The US remains on a fiscal footing that is as solid as other “AAA”-rated countries, the Moody’s ratings agency said on Monday, in a retort to last week’s downgrade by its rival Standard & Poor’s.

“Relative to other large ‘AAA’-rated governments, the US debt position is somewhat high, but not out of line with the positions of these countries,” Moody’s said in an analyst note.

The US benefits from strong long-term growth potential and the US dollar’s unique status as a global reserve currency, which lets Washington maintain higher levels of debt than it could otherwise, Moody’s said.

Moody’s also presented a more hopeful perspective than S&P on last week’s debt-reduction deal, which will cut more than US$2 trillion from US government spending over the next decade.

“Although the political process has been considerably more contentious than usual in the past few months, it finally did produce an agreement,” Moody’s said. “We expect further fiscal measures over time, albeit with vigorous debate over the particulars.”

Moody’s did say that its “Aaa” rating for the US would be at risk of a downgrade if the government weakened its commitment to fiscal discipline or if a significant economic deterioration undermined its finances.

S&P stunned the world on Friday by cutting the US long-term sovereign debt rating from “AAA” to “AA+” for the first time in history.

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