S&P maintains sovereign credit rating of US

Rating agency Standard and Poor's has affirmed its sovereign credit ratings on the US citing the country's resilient economy but maintained a negative outlook on continued political and fiscal risks.

S&P affirmed its 'AA+' long-term and 'A-1+' short-term unsolicited sovereign credit ratings on the US, with the outlook on the long-term rating as "negative".

Earlier in August 2011, S&P had downgraded the US government's sovereign credit rating. S&P had downgraded the long-term sovereign credit rating on the US to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

According to S&P, the credit strengths of the US include its resilient economy, its monetary credibility, and the US dollar's status as the world's key reserve currency.S&P further warned the likelihood of S&P lowering its long-term rating on the US within two years is at least one-in-three.

"The negative outlook reflects our opinion that US sovereign credit risks, primarily political and fiscal, could build to the point of leading us to lower our 'AA+' long-term rating by 2014," S&P said in a statement.

S&P further noted that "the US' credit weaknesses, compared with higher-rated sovereigns, include its fiscal performance, its debt burden, and what we perceive as a recent decline in the effectiveness, stability, and predictability of its policymaking and political institutions, particularly regarding the direction of fiscal policy."

The recent shifts in the ideologies of the two major political parties in the US could raise uncertainties about the government's ability and willingness to sustain public finances consistently over the long term.

"We believe that political polarization has increased in recent years," S&P said.Although the 2012 elections could resolve the US fiscal debate, but this outcome is "unlikely", S&P said.

S&P further cautioned the US' net general government debt, as a share of GDP, may continue to rise, from 77 per cent in 2011 to 83 per cent in 2012 and 87 per cent by 2016.

"Moreover, absent significant fiscal policy change, we expect US net general government indebtedness, as a share of the economy, to continue to increase after 2016," S&P said. 

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