Moody's warns US fiscal strength to be heading towards continued decline

Renowned financial ratings agency Moody's warned that the US' fiscal strength was on track for a continued multi-year decline as budget deficits widen and debt becomes less affordable.

The agency published a report on March 25 in which it recorded the country's fiscal health as having deteriorated further since 2023, Caliber.Az reports via Reuters.

Back then, Moody's lowered its outlook on the US credit rating to “negative” from “stable” citing large fiscal deficits and a decline in debt affordability under the Biden administration.

"Even in a very positive and low probability economic and financial scenario, debt affordability remains materially weaker than for other Aaa-rated and highly rated sovereigns," Moody's said.

Moody’s projects the US debt-to-GDP ratio to rise from nearly 100% in 2025 to 130% by 2035, with interest payments taking up 30% of revenue. While Moody’s still maintains a AAA rating for US debt, other notable rating agencies such as Fitch and Standard & Poor's (S&P) have already downgraded it from its top triple-A rating due to fiscal deterioration and debt ceiling disputes. Market uncertainty is further fueled by President Trump’s punitive tariffs, raising investor concerns over inflation and economic slowdown.

Credit ratings help investors evaluate the risk associated with companies and governments when they seek funding in debt markets. Typically, a lower rating leads to higher borrowing costs.

By Nazrin Sadigova