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International News>S&P maintains US debt rating at highest level- AP |
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Credit ratings agency Standard and Poor's said Thursday it is unlikely to lower its rating on the United States government in the near-term despite noting a "significant" weakening in public finances.
S&P said in a report it will retain its top triple A rating for the United States' long-term debt and added that the outlook is stable.
Last month, rival credit ratings agency Moody's Investors Service said the US government's "Aaa" rating is stable despite the country's swelling debt.
Significant Weakening
"Despite significant weakening in the near-term economic outlook, projected fiscal deficits, and the high fiscal costs of government support of the US financial sector, we still believe that the US government's credit strengths continue to outweigh its weaknesses," said Nikola Swann, a credit analyst at S&P.
Key strengths identified by Swann include the US' diversified economy, the dollar's pre-eminent role in the currency markets, an openness to trade and a stable political system.
Concerns about the ballooning budget deficit in the US have swelled as the Obama administration splashes out billions rescuing the financial system from its worst crisis since the 1930s and dealing with the worst recession in decades.
Deficit This Year
Under the administration's budget estimates, the US$1.84 trillion deficit this year will be followed by a US$1.26 trillion deficit in 2010 and will never dip below US$500 billion over the next decade.
The administration estimates the deficits will total US$7.1 trillion from 2010 to 2019.
Economists are worried that such large borrowing needs could trigger steep increases in interest rates if domestic and foreign investors start demanding a higher return for holding Treasury debt.
Treasury Secretary Timothy Geithner travelled to Beijing earlier this month to reassure officials in China, the single-largest holder of US Treasury debt, that the administration is serious about getting control of the deficits once the economic downturn and financial crisis have passed.
Worries about a possible downgrade to the US debt arose last month after S&P warned that Britain was at risk for a downgrade if the government fails to address its increasing levels of debt.
That would raise the cost of borrowing for the British government, which, like the US, has bailed out a number of its stricken banks.
Thursday's statement by S&P comes only a day after the agency cut its credit rating on 18 US banks, saying volatility will remain high in the financial sector and regulatory oversight is expected to be tightened.
- AP