(Reuters) -In a recent development, credit ratings agency Fitch has reaffirmed the long-term foreign currency sovereign credit rating of the United States at a robust "AA+". This decision comes with a positive outlook classified as 'stable,' showcasing confidence in the nation's economic resilience.
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Economic Projection for 2024
Fitch's latest forecast indicates a projected slowdown in the United States' gross domestic product (GDP) growth for the year 2024. Despite facing higher interest rates, the American economy demonstrated resilience, achieving a commendable 2.5% growth in 2023.
Fiscal Policy Impact
A significant contributor to this growth was the renewed fiscal policy easing, particularly evident in the substantial general government (GG) deficit observed in 2023. Fitch estimates the GG deficit to have reached 8.8% of the GDP in 2023.
Optimistic Outlook
Looking ahead, Fitch anticipates a narrowing of the GG deficit in 2024 to 8% of the GDP. This positive shift is attributed to escalating revenue growth, a reduction in spending, and the conclusion of some substantial one-off expenditures related to deposit insurance in the previous year.
Ongoing Challenges
While the economy showcases resilience, Fitch underscores the growing interest burden due to a higher debt load and the impact of elevated interest rates. This suggests a need for strategic financial management to mitigate potential challenges.
Future Policy Implications
Fitch emphasizes the critical role of the upcoming November presidential and congressional elections in shaping future policymaking. The outcomes of these elections will significantly influence the government's ability to pass and implement legislation, thus impacting the nation's economic trajectory.
Divergent Perspectives
It's worth noting that Moody's, a peer to Fitch, took a somewhat contrasting stance in November. Moody's downgraded its outlook on the country's credit rating to "negative," citing concerns about substantial fiscal deficits and a decline in debt affordability.
In conclusion, Fitch's reaffirmation of the 'AA+' rating with a 'stable' outlook for the United States reflects a positive stance on the nation's economic trajectory. As we navigate through 2024, the dynamics of fiscal policy, economic resilience, and political outcomes will undoubtedly shape the narrative of the United States' financial landscape.