A US government shutdown will have a negative impact on the nation’s credit, credit rating agency Moody’s said on Monday, the stark warning coming a month after Fitch downgraded the US by one notch following the debt ceiling crisis.
US government services will be disrupted and hundreds of thousands of federal workers furloughed without pay if Congress fails to provide funding for the fiscal year starting Oct. 1.
The possible shutdown would be further evidence of how political polarization in Washington is weakening fiscal policymaking at a time of growing pressure on government debt affordability due to higher interest rates, Moody’s analyst William Foster told Reuters.
“If there isn’t an effective fiscal policy response to try to offset those pressures… then it’s likely to have an increasingly negative impact on the credit profile,” Foster said. “And that can lead to negative views, potentially downgrading at some point, if those pressures aren’t addressed.”
US government services will be disrupted and hundreds of thousands of federal workers furloughed without pay if Congress fails to provide funding for the fiscal year starting Oct. 1.REUTERS
Moody’s has an “Aaa” rating for the US government with a stable outlook – the highest credit rating it gives to borrowers. It is the last major agency with such a rating after Fitch downgraded the government’s triple A rating by one notch in August to AA+ — the same rating given by S&P Global in 2011.
“Fiscal policymaking has been less robust in the US than most Aaa-rated peers, and another shutdown would be further evidence of this weakness,” Moody’s said in a statement.
The economic impact of the shutdown is likely to be limited and short-lived, with the most direct economic impact due to lower government spending. Of course, the longer the shutdown lasts, the more negative the impact will be on the broader economy, Moody’s said.
“Fiscal policymaking has been less robust in the US than most Aaa-rated peers, and another shutdown would be further evidence of this weakness,” Moody’s said in a statement.REUTERS
Congress has so far failed to pass any spending bills to fund federal agency programs in the fiscal year that begins Oct. 1 amid infighting among the Republican Party.
The shutdown will not affect government debt payments but it will come just months after political turmoil surrounding the US debt limit threatened to trigger a sovereign debt default.
The crisis, although it was eventually resolved before any missed debt payments, was a major factor that prompted Fitch to downgrade its US rating by one notch last month.
Congress has so far failed to pass any spending bill to fund the federal agency’s programs amid Republican infighting. Above, House Speaker Kevin McCarthy.AP
“In this environment of higher rates for longer periods and pressures building on the debt affordability front, it is even more important that fiscal policy can respond,” said Foster at Moody’s.
“And it looks increasingly challenged because of things like the government shutdown and coming out of the debt limit episode, because it’s a polarized political dynamic in Washington,” he said.
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Source: thtrangdai.edu.vn/en/
