March 26, 2020 / 9:45 PM / 14 days ago

UPDATE 1-Fitch affirms U.S. rating amid coronavirus outbreak, warns of credit risks

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March 26 (Reuters) - Fitch Ratings on Thursday affirmed the United States’ credit rating at AAA with a stable outlook, but warned that even before the massive economic shocks caused by the spreading coronavirus, the nation’s already high and rising debt and deficits were starting to erode its credit strengths.

Big swaths of the U.S. economy have shuttered as state and local governments ordered people to shelter in their homes to stop the virus’ spread. Meanwhile, the U.S. Congress has taken up a $2 trillion spending package to address the fallout.

“The risk of a near-term negative rating action has risen given the magnitude of the shock to the economy and public finances from the coronavirus and the commensurate and necessary fiscal policy response, particularly in the absence of a credible consolidation plan for the country’s pre-existing, longer-term public finance and government debt challenges,” the credit rating agency said in a statement.

Under its “evolving baseline forecast” that is subject to revision, Fitch said U.S. GDP would shrink by about 3% this year, calling that “an unprecedented occurrence in peacetime and a deeper contraction than in 2009.”

It added that the degree to which the U.S. economy recovers and the extent to which the fiscal stimulus is eventually unwound will be key rating considerations, although the prospect of permanently high budget deficits will weigh increasingly heavily on creditworthiness. (Reporting by Kanishka Singh in Bengaluru and Karen Pierog in Chicago; Editing by Sandra Maler and Diane Craft)

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