At the same time, Fitch also emphasizes that since last year it downgraded the US debt rating from the best possible “AAA” to “AA plus” by one grade, the American budget position weakened even further, although the real economy outperformed.
The company stated: in this environment, it expects the US public debt ratio to GDP to continue to rise, and according to its current forecast, the sovereign debt stock as a ratio of GDP will rise to 122 percent by 2026 from the 115 percent expected this year. Fitch points out: the US government debt ratio it expects for 2026 is approximately 1.5 percentage points higher than the base case forecast in effect at the time of last year’s downgrade.
Analysts at Fitch Ratings estimate this year’s US public budget deficit as a percentage of gross domestic product at 7.6 percent, and expect similar annual deficits for the period 2025-2026.
At the same time, they emphasize that the tax policy measures promised by the elected president burden the deficit forecasts for 2025 and 2026 with risks. They recall that Donald Trump wants to cut the corporate tax rate from 21 percent to 15 percent and has promised tax exemptions for certain categories of income, including overtime pay, tips and social security benefits.
According to Fitch Ratings, these measures can also increase the buoyancy affecting the deficit.
The yield on the ten-year US Treasury bill has risen by almost 80 basis points since September, and the proportion of interest payment obligations within the budget exceeds that of defense spending or the federal health insurance program Medicare, the credit rating agency emphasizes in its analysis.
Fitch said: he expects interest payment obligations to rise to 11.8 percent of federal budget revenues in 2025 from the 11 percent expected this yeareven though the median interest liability rate of the farms classified by the company in the “AA” sovereign debt category does not reach 4 percent.
- A Fitch Ratings last August, it withdrew the best possible “AAA” sovereign debt rating from the United States, downgrading it to the currently valid “AA plus”. Even then, the company justified the decision with the expectation that in the next three years the indicators of the American public finances will deteriorate and the public debt burden will increase.
- A Standard & Poor’s – the first of the global market leading credit rating agencies – already withdrew the elite “AAA” rating from the United States in 2011, and currently also records the long-term American public debt with a rating of “AA plus” one grade lower.
- Of the three global credit rating agencies, only Moody’s Ratings records the best possible rating for US government debt obligations – marked with “Aaa” in this company’s methodology – but since last November, Moody’s has also maintained a negative outlook on the rating.
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Source: www.portfolio.hu
