Credit rating agency Moody's said today that it saw no need to lower the triple-A sovereign rating of the US, despite the global economic crisis battering the world's largest economy.
'Even with a significant deterioration in the US government's debt position, its rating has a stable outlook and demonstrates the attributes of a AAA sovereign,' Moody's Investors Service said in its annual report on the US.
The agency cited the country's 'diverse and resilient' economy, strong government institutions, high per capita income, and a central position in the global economy, as well as the dollar's role as the world's reserve currency, among reasons to maintain the top rating.
'Moody's expects that, because of these factors, US economic strength will emerge after the crisis without major impairment,' it said. 'The global role of the US currency also contributes to the ability of the economy and government finances to rebound,' it added.
Speculation had swirled that the US may be headed for a credit downgrade after ratings agency Standard & Poor's downgraded its outlook on Britain to 'negative' because of soaring public debt, raising the possibility the European financial powerhouse could lose its triple-A rating.
The speculation hit financial markets and prompted US President Barack Obama's administration on Friday to downplay the risk for the US.
Moody's acknowledged the sharp increase in the US debt load after the government poured hundreds of billions of dollars into an attempt to stabilise the financial system and approved a $787 billion stimulus package earlier this year.
A sharp recession, which began in December 2007, also has weighed on government finances, it noted. 'The result has been much higher debt ratios that may persist for some years to come. While these ratios are deteriorating in the US, they are also doing so in most other advanced economies due to the global recession,' Moody's said.
'Furthermore, the level of debt is less important than the government's balance sheet flexibility, which Moody's believes is still high in the case of the US,' it added.
Among other factors supporting the gold-plated rating were strong productivity and a flexible labour market. A higher rate of population growth until 2025 compared with other advanced economies also was expected to contribute to output growth and increased government revenues.
'While our outlook for the US 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,' the agency said.
