Fitch affirms US rating but warns on mounting debts

WASHINGTON: Ratings agency Fitch on Thursday left the top-notch US sovereign debt grade unchanged at "AAA" with a stable outlook, but warned faster borrowing could eventually test America's credit strength.

In a statement, the agency said December's sweeping $1.5 trillion tax cuts were likely to balloon US debt and deficits while having "some positive impact" on near-term growth.

Nevertheless, Washington enjoys the unique advantages of issuing the world's foremost reserve currency and drawing on the "most liquid asset market in the world" in the form US Treasury bills.

"While there has been a recent loosening in fiscal policy, Fitch considers debt tolerance to be higher than that of other sovereigns," the agency said in a statement.

The agency cited size of the world's largest economy, high per capita income and a robust business environment as other major factors behind the rating.

But growing borrowing costs and prolonged fiscal imbalances could see US debt, already at its highest level in the post-war era, rise to 129 percent of GDP by 2027, the agency said.

The general US government deficit, of which the federal deficit is the largest share, should hit five percent of GDP this year and six percent in 2019.

"The US debt burden is a relative credit weakness compared with  other 'AAA' sovereigns," the agency said.

"Running a large deficit at this point in the economic cycle puts the public finances in a weaker position to confront any future economic downturn."