One of China’s leading ratings agencies has downgraded the United States’ sovereign credit standing due to concerns over its increasing dependence upon debt-driven growth.
Dagong Global Credit Rating announced on Tuesday that it had given the US sovereign ratings a negative outlook, reducing its standing to BBB+ from A-.
Dagong cited the Republican Party’s recently passed tax reform and its impact on US debt repayment capability as one of the chief reasons for the credit ratings downgrade.
“The perennial negative impact of the superstructure on the economic base has continued to deteriorate the debt repayment sources of the federal government, and this trend will be further exacerbated by the government’s massive tax cuts,” said Dagong.
According to Dagong the US continues to rely on debt-driven economics that are hampering sustainable development, while “political deficiencies” are also impeding the ability of the government to act decisively.
“The government did not discover from the financial crises that it is the debt-driven mode of economic development that has hindered the country from making ends meet.
“Deficiencies in the current US political US ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track.”
Dagong predicts that the US federal government will be forced to lift the debt ceiling with greater frequency in future due to its dependence on debt-fuelled economic growth.