TORONTO, Jan. 10 /PRNewswire/ -- Standard & Poor's Ratings Services today said it affirmed its ratings, including its 'AAA' long-term sovereign credit rating, on the United States of America. The outlook is stable.
"The ratings on the U.S. rest on its high-income, highly diversified, and exceptionally flexible economy, which is backed by a strong track record of prudent and credible monetary policy," said Standard & Poor's credit analyst Nikola Swann. "The ratings also reflect the U.S. public sector's fiscal flexibility and the unique advantages resulting from the U.S. dollar's preeminent place among currencies. These strengths outweigh growing economic, fiscal and protectionism risks, and the country's very large external debtor position," Mr. Swann added.
The U.S. has arguably the most flexible economy of any high-income nation, with both exceptionally adaptable labor markets and a long track record of openness to capital flows, as well as minimal government intervention. In addition, the public sector uses a far smaller share of national income than in the U.K., France, or Germany (all AAA/Stable/A-1+), implying greater revenue flexibility; and the U.S. dollar is by far the world's most used currency. The latter characteristic provides unique external flexibility: the vast majority of U.S. trade flows and external liabilities are denominated in its own dollars. This privileged position has not been materially affected by recent depreciation and global rebalancing, nor do we expect it to be.
Risks to the U.S. credit profile do exist. Consumers could react more sharply or enduringly than expected to falling house prices and tightening credit supply, meaning real GDP growth could slow to lower than our 1.9% forecast for 2008, and the recovery might be weaker, or delayed, compared with our forecast 2.8% growth in 2009 and near 3.0% in subsequent years. This would worsen the short-term fiscal outlook. Medium-term fiscal risks include contingent liabilities of the U.S. government resulting from any future official bailout of parts of the U.S. financial sector. Long-term fiscal risks, emanating from largely unfunded entitlement programs, will grow as long as they remain unaddressed. External risks are reflected in the country's net external debt level, which we expect to be 200% of current account receipts in 2008. That represents one of the highest levels among all 117 sovereigns rated that we rate. Furthermore, recent political discourse suggests the increasing possibility of a move toward protectionist trade policies, which would reduce economic flexibility.
The stable outlook reflects our view that the U.S. economy's considerable characteristic strengths will continue to outweigh the several risks to its credit profile. Substantial negative surprises in terms of medium-term economic growth, fiscal events and policy changes, combined with a meaningful decline in the global importance of the U.S. dollar, could cause us to change this view.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at http://www.ratingsdirect.com/. All ratings affected by this rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com/; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search.
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