Sun, Jun 30, 2013 - Page 13 News List

Fitch keeps US rating at ‘AAA,’ outlook negative

STRONG FUNDAMENTALS:The ratings agency called the US economy dynamic and resilient, but warned that it was the most heavily indebted country with a triple-A rating

AFP, WASHINGTON

Ratings agency Fitch on Friday kept its “AAA” credit rating for the US on a negative outlook, despite improvements in Washington’s fiscal picture.

Fitch said the country still merited the top-level triple-A rating due to its “strong economic and credit fundamentals,” underpinned by the US dollar’s role as the world’s leading reserve currency.

UNCERTAINTY

However, the negative outlook — which raises the chance of a near-term downgrade — was merited due to what Fitch called “continuing uncertainty” over whether the government would act to reduce its debt over the medium and long term.

Fitch also cited near-term risks in the looming, simultaneous political battle over raising the country’s debt ceiling and passing a federal budget.

It said the US economic recovery is gaining traction, helped by deleveraging in the private sector, a rebound in housing and a slow fall in unemployment.

The economy “remains more dynamic and resilient to shocks than its high-grade rating peers,” it said.

At the same time, it warned the country remains the most heavily indebted country with an “AAA” credit grade.

VULNERABLE

Even if public debt has been stabilized, it said, the high debt burden “still renders the US economy and public finances vulnerable to adverse shocks.”

“In the absence of additional spending reform and revenue measures, deficits and debt will begin to rise again at the end of the decade,” Fitch said.

It said that it would review the rating by the end of the year, warning that failure to raise the debt ceiling in a timely manner — before fresh spending cutbacks would be forced to keep up payments — would “likely lead to a downgrade.”

The Treasury has said it can function under the current US$16.7 billion ceiling through at least the beginning of September.

This story has been viewed 1161 times.
TOP top