Moody’s warns of declining US economic strength amid rising debt, budget deficit

Logo of Moody’s

Moody’s warned that the United States' economic strength is expected to weaken over the coming years due to a widening budget deficit and record-high debt costs.

In a report released today, March 25, the agency stated that the US fiscal position has deteriorated further since Moody’s downgraded Washington’s credit outlook from "AAA" in November 2023.
 

"Even under a highly favorable economic and financial scenario, the US remains significantly weaker in terms of debt affordability compared to lower-rated sovereigns," the agency noted.
 

Moody’s also highlighted that the US government is now less capable of managing debt costs due to rising interest rates, making the dollar’s pivotal role in supporting the current credit rating even more crucial.
 

Additionally, the agency warned that high tariffs, unfunded tax cuts, and other economic risks could further widen the fiscal deficit and weaken debt affordability, negatively impacting the country's credit outlook.