Fitch Ratings has reaffirmed the United States' credit rating at 'AA+' with a stable outlook as of August 29, 2024, citing the structural strengths of the US economy and the dollar's status as a reserve currency as key factors. However, Fitch has expressed concerns regarding high fiscal deficits and rising debt levels, noting that the general government deficit increased to 8.8% of GDP in 2023, up from 4.1% in 2022. Projections indicate that the general government debt-to-GDP ratio could reach 124.4% by 2026, highlighting ongoing fiscal challenges [836cbe61].
In a recent update, Fitch revised its global economic growth forecast for 2024 from 2.6% to 2.7%, driven by upward revisions for the U.S., Great Britain, Brazil, and Russia. Specifically, the U.S. growth forecast has been increased from 2.1% to 2.5% for 2024, reflecting a more optimistic outlook for the American economy [2dcf7988]. The Federal Reserve is expected to initiate rate cuts starting in September 2024, with a projected reduction of 0.25% in both September and December, in response to the weakening economic conditions and the impact of rising debt [b1ec2231].
Political polarization and governance issues have also been highlighted as significant factors affecting the economic outlook. With the upcoming elections on November 5, 2024, Fitch suggests that the US fiscal profile is unlikely to change significantly post-elections, regardless of the outcome. Current polling shows Vice President Kamala Harris leading former President Donald Trump by 45% to 41%, indicating a competitive race that could influence future economic policies [34296ee5].
Fitch's analysis indicates that while the US economy is facing challenges, its fundamental strengths provide a buffer against more severe credit downgrades. The agency has also noted that tax cuts from 2017 are likely to be extended, which could further impact fiscal policy moving forward [34296ee5]. Additionally, Fitch has noted that US credit conditions are expected to deteriorate in the second half of the year, driven by slowing economic growth and softening labor market conditions. This aligns with earlier forecasts indicating a rise in delinquencies and defaults, particularly among rate-sensitive borrowers [d783cdaa]. Meanwhile, China's growth forecast for 2024 stands at 4.8%, and Eurozone growth is projected at 0.8% [2dcf7988].