The credit rating agency Fitch Ratings has lowered the long-term debt solvency rating of the United States one notch, which now stands at ‘AA+’ from ‘AAA’ with a stable outlook, as a reflection of the expected fiscal deterioration over the next few three years and the high and growing debt burden of the Government.

Likewise, the risk rating agency has explained that its decision also takes into account “the erosion of governance” in relation to other sovereign issuers rated ‘AA’ and ‘AAA’ during the last two decades, as has been manifested in repeated confrontations about debt limits and last-minute resolutions.

In this way, Fitch has fulfilled its threat to lower the rating of the world’s leading economy, which it had placed on negative watch last May during the latest political crisis, in order to suspend the debt ceiling. Following the decision announced by Fitch Ratings, only Moody’s maintains the highest solvency grade for the long-term debt of the United States, after S&P Global downgraded the country’s rating in 2011.

In its analysis, Fitch has pointed to the fiscal challenges facing the United States over the next decade, warning that higher interest rates and rising debt stocks will increase the interest service burden, while an aging population and rising health care costs will increase spending in the absence of fiscal policy reforms.

In addition, the agency has warned that the 2017 tax cuts will expire in 2025, although there is likely to be political pressure to make them permanent, as has been the case in the past, resulting in higher deficit projections.

On the other hand, the risk rating agency expects that the US economy will enter a recession at the end of 2023 and the beginning of next year as a result of stricter credit conditions, the weakening of business investment and the slowdown in consumption. The agency expects US real GDP annual growth to slow to 1.2 % this year from 2.1 % in 2022 and growth to just 0.5 % in 2024.

Fitch’s decision is considered arbitrary

For her part, the US Treasury Secretary, Janet Yellen, has criticized Fitch’s decision to lower the US rating. “I strongly disagree with Fitch Ratings’ decision. The Fitch Ratings change announced today is arbitrary and based on outdated data,” Yellen said.

In any case, for Yellen, Fitch’s decision “does not change” the view of Americans, investors and people around the world about US Treasury-issued debt as the world’s preeminent safe and liquid asset. “The US economy remains the largest and most dynamic economy in the world, with the deepest and most liquid financial markets in the world,” he stressed.

Source: dpa

(Reference image source: Lukas Zischke, Unsplash)

Visit our news channel on Google News and follow us to get accurate, interesting information and stay up to date with everything. You can also see our daily content on Twitter and Instagram

La entrada Fitch strips the US of its “AAA” rating apareció primero en Bitfinance.

This Monday, China’s offer to buy the debt of El Salvador, a pro-cryptocurrency Central American country, was announced as a measure to help refinance its external obligations.

The vice president of El Salvador, Félix Ulloa, said this week that China offered to buy the debt and thus prevent it from falling into default. It is important to note that according to Moody’s, S&P and Fitch Ratings, the nation “currently has the lowest risk rating in Central America.”

Ulloa told Bloomberg during an event in Madrid, Spain, that the Asian country made the offer to buy his country’s debt, which currently has a CCC+ rating from S&P Global Ratings. This is seven notches below investment grade.

The main reason for this strategy launched by Xi Jinping would be to help El Salvador avoid falling into default, taking into account that it currently has 670 million dollars in bonds maturing on January 24.

El Salvador is at a crossroads. Even if it can avoid a sovereign default in 2023, “in our baseline, the reserves would disappear if the government paid the redemption of the 2025 eurobonds,” Oxford Economics analysts Felipe Camargo and Lucila Bonilla noted in an October note.

M.Pino

Click the link to subscribe for free to our news and media group on Telegram: https://t.me/G_ELSUMARIO_News

Source: elfinanciero

La entrada China offers to buy El Salvador’s debt apareció primero en Bitfinance.