By Ovunc Kutlu
ISTANBUL (AA) — Fitch Ratings downgraded the US' long-term foreign-currency credit rating to "AA+" from "AAA" with a stable outlook.
The change reflects expected fiscal deterioration over the next three years and a high and growing general government debt burden, as well as debt limit standoffs and last-minute resolutions, the rating agency Tuesday.
"These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade," it said in a statement.
Fitch said it expects the government deficit will rise to 6.3% of gross domestic product (GDP) in 2023, from 3.7% in 2022, before increasing further to 6.6% of GDP in 2024 and to 6.9% of GDP in 2025.
"Over the next decade, higher interest rates and the rising debt stock will increase the interest service burden, while an aging population and rising healthcare costs will raise spending on the elderly absent fiscal policy reforms," said the statement.
The agency said it forecasts tighter credit conditions, weakening business investment, and a slowdown in consumption, pushing the US economy into a mild recession in the fourth quarter of this year and the first quarter of next year.
Fitch estimates US annual real GDP growth slowing to 1.2% this year, from 2.1% in 2022, and overall growth of 0.5% in 2024.