Credit rating agency Fitch said Wednesday it expects the US fiscal deficit to remain high this year, and the fiscal policy and governance implications of the presidential election will be key issues for the country’s sovereign rating.
Fitch last year downgraded the US government’s top credit rating to AA+ from AAA, citing fiscal deterioration and repeated debt ceiling negotiations.
A major short-term shift to deficit-reduction measures is unlikely due to political polarization, Shelly Shetty, head of American Sovereign Ratings at Fitch Ratings, said in a webinar on Wednesday.
The US debt rating would be affected by a “significant increase” in general government debt, and a decline in the coherence and credibility of policymaking that affects the US dollar’s reserve currency status, he added.
Fitch’s downgrade in August, two months after the debt ceiling crisis was resolved, drew an angry response from the White House and shocked investors.
Fitch’s downgrade in August drew an angry response from the White House and shocked investors. AP
It highlighted the sustainability of the government’s debt – a theme that drove the summer bond sell-off as investors grew concerned about the federal debt burden expanding and higher interest payments.
The nonpartisan Congressional Budget Office has estimated a cumulative budget deficit of about $20 trillion over the next decade.
A major short-term shift to deficit reduction measures is unlikely due to political polarization, Fitch said. AP
However, Fitch said the outlook for the US economy has improved. It no longer expects a recession this year but “a shallower recession” than previously forecast, Fitch Chief Economist Brian Coulton said in the webinar. When the agency downgraded the debt, it expected a moderate recession by the end of 2023 and in the current quarter.
Fitch expects the Federal Reserve to cut interest rates three times this year, positive for corporate debt issuers, said Winnie Cisar, head of global strategy at CreditSights, a Fitch company.
However, Fitch said the outlook for the US economy has improved. Reuters
While the election is unlikely to affect the decision of high-yield and leveraged loan issuers to tap the debt market, he predicts price volatility in the secondary corporate debt market around the presidential primary election in March.
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Source: thtrangdai.edu.vn/en/
