Pitch "US Economic Growth Rate Forecast at -3% This Year" ...Credit Rating Maintained at 'AAA'

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The global credit rating agency Fitch has significantly downgraded its forecast for the United States' economic growth rate (GDP) this year to minus 3%. While maintaining the current sovereign credit rating, it warned that a negative outlook could emerge depending on the impact of COVID-19 going forward.

On the 26th (local time), Fitch announced in a report that it is revising down the U.S. GDP growth rate for this year to -3%, compared to the previous forecast of 1%. The sovereign credit rating remains at 'AAA', with a 'stable' outlook. However, Fitch stated, "The already high level of fiscal deficit and debt in the U.S. has begun to weaken credit strengths," adding, "Considering the shock of COVID-19, the risk of a negative outlook for the rating has increased in the short term."

Additionally, Fitch expects that if the spread of COVID-19 slows down in the second half of this year and containment measures begin to be lifted, growth and employment will recover starting next year. Fitch explained, "The U.S. government has started to roll out a $2 trillion fiscal stimulus package, and the Federal Reserve (Fed) has announced it will use all policy tools, so with fiscal and monetary policies working together, GDP growth next year is expected to recover significantly compared to this year."

However, Fitch also forecasted that the rising government debt ratio due to fiscal policy will have a negative impact on the U.S. sovereign credit rating in the future. Fitch projects the U.S. fiscal deficit this year to be 13% of GDP, a significant increase from last year's 4.6% of GDP.

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