Fitch, US Debt Downgrade a Possibility
Fitch, US Debt Downgrade a Possibility
In its latest review Fitch Ratings warns that continuing weakness in the developed economies and the threat that the US will dive off of the Fiscal Cliff are having a negative effect on global sovereign credit quality. The impact is also spilling over into emerging markets debt, which are exposed to the weakness in developed nations’ economies.
The report notes that 7 of 10 of the world’s largest economies are currently on ‘negative outlook’. The recent agreement in the Eurozone to continue bailing out Greece is seen as a positive sign, but the single biggest threat to the global economy remains the US Fiscal Cliff.
Emerging market economies are expected to regain some of their past momentum in Y 2013, with China, India, and Brazil leading the way. GDP growth in China is forecast at 8%, India at 7%, and Brazil at 4%.
In contrast, US GDP growth in Y 2013 is forecast at 2.3%, while the Eurozone is expected to experience GDP contraction of 0.1%.
Sans an agreement on US fiscal policy could result in even lower growth than these already weak numbers anticipate.
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