RTTNews - Moody's Investors Service revealed Wednesday that its Aaa credit rating on the U.S. has a stable outlook even with the significant deterioration in the government's debt position. The Aaa credit rating is the highest possible.
In its annual report on the U.S., Moody's said it demonstrates the attributes of a Aaa sovereign, including a diverse and resilient economy, strong government institutions, high per capita income, and a central position in the global economy.
Steven Hess, Moody's Vice President and author of the report said, Moody's expects that, because of these factors, U.S. economic strength will emerge after the crisis without major impairment.
The global role of the U.S. currency also contributes to the ability of the economy and government finances to rebound, Hess added.
While the U.S. debt has been on the rise due to efforts to stabilize the financial system, the effects of the recession, and the $787 billion federal stimulus package, Moody's said the level of debt is less important than the government's high balance sheet flexibility.
Additionally, Moody's predicted that a higher rate of U.S. population growth through 2025 relative to other advanced economies will contribute to continued economic growth and government revenues.
However, Hess noted, While our outlook for the U.S. rating is stable, a reassessment of the long-term growth prospects of the economy and the ability of the government to return to a sustainable debt trajectory could put negative pressure on the rating in the future.
How the economy and fiscal policy fare after the recession will be key, he added.
Hess also said that contingent liabilities related to Social Security and Medicare programs could also pressure the U.S. government's credit rating over the longer term.
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