Fitch maintains US AAA rating despite coronavirus

Fitch maintains US AAA rating despite coronavirus

Fitch predicts the US economy will shrink by three percent this year as the coronavirus causes widespread joblessness and a recession
Fitch predicts the US economy will shrink by three percent this year as the coronavirus causes widespread joblessness and a recession

WASHINGTON - Fitch Ratings on Thursday reaffirmed the United States's AAA credit rating, even with the country facing rising unemployment and a looming recession as the coronavirus pandemic exacts its toll.

"The US sovereign rating is supported by structural strengths that include the size of the economy, high per capita income and a dynamic business environment," Fitch said.

The rating came as the Department of Labor reported unemployment claims surging to 3.3 million in the week ending March 21 after the pandemic caused many businesses to close.

Fitch predicted that US GDP will shrink by about three percent this year, worse than during the global financial crisis in 2009, but the economy could recover in 2021 if the virus is contained.

The Senate passed a massive $2.2 trillion stimulus measure late on Wednesday, and expectations of its swift enactment pushed Wall Street to rally with the Dow closing up 6.2 percent.

"As fiscal and monetary policy effectively merge, government will spend in order to cushion the income losses suffered by households and businesses and lessen the destruction of potential output," Fitch said in its report, released after markets closed.

However it warned that the country's high deficits were set to get even worse thanks to the stimulus package's spending and the lack of political agreement to address the US's debt in the long-term.

"The stimulus package has yet to be officially assessed for its budget impact, but at a conservative estimate, the federal fiscal deficit will rise to over 13 percent of GDP in 2020 from 4.6 percent of GDP in" fiscal year 2019, Fitch said.

Predicting government debt will rise to 115 percent of GDP by the end of 2020, "This would put the debt ratio, absent consolidation, on course to surpass a level Fitch has previously considered inconsistent with 'AAA' status."

Do you like the content of this article?
COMMENT (2)

Thai 'injured' during Israel-Palestine conflict

The violence in Israel has affected Thais living there, with one injured in the conflict, Foreign Ministry spokesman Tanee Sangrat said on Wednesday.

12 May 2021

Malaysia raises alert over spiking Covid-19 cases

KUALA LUMPUR: The Malaysian Health Ministry on Wednesday cautioned that the country has yet to see the worst of a current surge in coronavirus cases, as it reported its highest daily death count to date.

12 May 2021

Philippines flags 'incursions' by nearly 300 Chinese militia boats

MANILA: The Philippines on Wednesday reported what it said were incursions into its exclusive economic zone (EEZ) by 287 maritime militia vessels from China, in a further sign of cracks reappearing in a relationship after a period of rapprochement.

12 May 2021