'The outlook has been revised to negative to reflect the ongoing deterioration in the US public finances and the absence of a credible fiscal consolidation plan,' says Fitch Ratings.
Ratings agency Fitch on Friday, July 31, downgraded the outlook for the United States to negative from stable, warning of high debt and deficits made worse by the coronavirus downturn.
Though it expected the US would suffer a less severe downturn this year than other comparable economies, Fitch said its decision to change its outlook reflected concerns of both mounting debt and policy gridlock. The bill may stabilize 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 healthcare and social security costs could also threaten the stability, Fitch said.
"It is a truism that the US government cannot run out of money to service its debts," Fitch said."However, there is a potential risk of fiscal dominance if debt-to-GDP spirals, posing risks to US economic dynamism and reserve currency status."
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