Economic growth and debt
Ex-US President Barack Obama left his successor, Donald Trump growing economy and a high but stable level of debt. With a new administration, both figures will continue to grow, but fiscal problems threaten more and more to limit the lending capacity of the US by 2020, predicts the international rating Agency Moody’s.
The American economy is the largest in the world — has a significant margin of safety. It shows a very high level of diversification, dynamism and competitiveness, has rich natural resources. It also features a high level of income and favorable demographic trends, write Moody’s analysts in its macroeconomic review “the US Government — President of the trump inherits a low deficit and a healthy economy, but the debt problems are increasing” (have). The country’s GDP growth accelerated in recent quarters — at the end of 2016, it was 1.6%. Under the new President the us economy will continue to grow at a faster pace: in 2017 2.4% 2018 2.5%, predicts Moody’s. The increase in GDP in the short term will also contribute to a stimulating fiscal policy with gradual tightening of monetary policy.
Stable revenue growth over the eight years of the Obama presidency has helped to reduce the Federal budget deficit from 9.8% of GDP to 3.2% of GDP (2009 to 2016). As a result, both increased — deficits and revenues — to-GDP returned to pre-crisis levels. However, if action is not taken, rising spending on social and medical programs will again increase the deficit, warns Moody’s. Increase Federal debt and interest rates, in turn, will limit the ability of U.S. authorities to respond to a variety of shocks, analysts say. The level of Federal debt in the United States — 77% of GDP — one of the highest for countries with the highest credit rating Aaa. The index will remain stable in the coming years, but by the end of the presidential term, trump the social costs will contribute to its growth, predicts Moody’s. If you do not take steps to 2026 fiscal year Federal budget deficit will reach 85% of GDP, according to analysts of the Agency.
The strength of the American economy contributes to the credit potential of the United States. The stable Outlook on the credit rating countries Aaa is based on stable institutional structures, including a large respect for the rule of law and high transparency, explains Moody’s.
During the presidential campaign, trump announced a package of measures aimed at stimulating the national economy. It covers initiatives in the areas of trade, taxation, and infrastructure. “Although these measures may affect economic growth and fiscal policy in the short term, they will not be able to directly limit the effect that increasing social spending have on the Federal debt and the stability of the financial system,” said Sarah Carlson, senior Vice President of Moody’s.
Fiscal measures, including reducing the tax burden on businesses and increase investment in infrastructure can contribute to economic growth in the coming years, but the positive effect of these measures will come to naught without an increase in productivity, according to a survey. Social spending is a key factor affecting the creditworthiness of the United States, says Carlson. The proposed trump economic reforms in the form in which they are now formulated, limits the potential for its improvement, said Moody’s. On the other hand, measures aimed at reducing the trading activity of the US in the world, and a significant immigration restriction, can slow the growth in the medium term, analysts say. In the short term these initiatives on the economy impact is a consequence of the relatively low openness of the us trade and low dependence of the budget from export revenues, concludes the Agency.